Ripple CEO Warns SEC’s Appeal Win Could Drive US Crypto Firms Offshore

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As an analyst with extensive experience in the cryptocurrency sector, I find Brad Garlinghouse’s concerns about the potential consequences of the SEC’s appeal to be well-founded and justified. The ongoing legal battle between Ripple and the SEC is crucial for the entire industry, as it could set a significant precedent regarding the classification of crypto tokens.

Brad Garlinghouse, CEO of Ripple, has voiced worries about the possible repercussions that the crypto sector might face if the United States Securities and Exchange Commission (SEC) is victorious in their current appeal.

In a recent discussion, Garlinghouse emphasized that the key point in Ripple’s appeal is whether an “investment contract,” as defined by the Securities Act, necessitates an expressly written agreement.

Ripple CEO Highlights Caution Should US SEC’s Appeal Win

During a recent discussion, entrepreneur Anthony Pompliano questioned Ripple CEO Brad Garlinghouse on the SEC’s stance and its implications for the crypto sector. Pompliano raised concerns about how the classification of crypto tokens as “investment contracts” might affect platforms like Coinbase, which facilitate trading of various tokens. 

In response, the CEO of Ripple expressed concerns that a win by the SEC in this matter could potentially cause disruption within the industry, leading businesses to contemplate moving their operations outside the United States. This statement follows their recent filing of a cross-appeal aimed at gaining clarity on whether an investment contract under U.S. securities laws necessitates a formal written agreement between parties.

This question lies at the heart of its ongoing suit against the regulator, which claims that Ripple’s sale of XRP constitutes an unregistered securities offering. 

If the Securities and Exchange Commission (SEC) manages to win this argument, it could create chaos within the industry, according to Garlinghouse. This decision would merely shift more of these activities overseas, he added. Ripple’s legal team claims that XRP resembles Bitcoin in not meeting the criteria for a security. Stuart Alderoty, Ripple’s Chief Legal Officer, underscores that the court has previously classified XRP as a non-security, and the SEC is not challenging this classification.

US SEC Criticized for Inconsistency

Pompliano raised a point of contention with Garlinghouse, questioning the seeming inconsistency in the Securities and Exchange Commission’s approach – granting approval for companies like Coinbase to go public and allowing Bitcoin ETFs, while simultaneously enforcing strict regulations on other cryptocurrency businesses.

According to Garlinghouse, the regulator’s decisions appear to be unpredictable, hinting that the approval for the ETF was more like a forced concession rather than an enthusiastic acceptance. This implies that regulatory approvals are being granted with reluctance, highlighting the difficulties the industry encounters in obtaining clear directives.

Following a question about expressing something positive regarding the regulator, Garlinghouse jokingly responded, “There will likely be a new chair at the SEC.” This remark mirrors ETF analyst Eric Balchunas from Bloomberg Intelligence, who suggests that the fate of crypto ETFs could hinge on the results of the upcoming U.S. presidential election.

According to Balchunas, if ex-President Donald Trump were to be reelected, an SEC chairman with leanings towards libertarianism might foster conditions that are advantageous for the approval of crypto Exchange Traded Funds (ETFs).

Optimism for Ripple Amid Regulatory Challenges

In spite of the ongoing challenges, Ripple’s CEO Brad Garlinghouse remains hopeful about the company’s future prospects. He pointed out a surge in interest from institutional investors and significant financial entities, suggesting a period of possible growth for the firm. During their recent Swell conference, representatives from prominent global banks discussed possibilities to utilize digital assets for faster and more effective payment systems and financial services.

According to Garlinghouse, the company is venturing into the fields of custody and stablecoins, which he finds promising for their long-term plans. Additionally, he suggested that an exchange-traded fund (ETF) centered around XRP might eventually become unavoidable, demonstrating their conviction in XRP gaining widespread recognition as a mainstream asset.

According to Garlinghouse’s remarks, the extension of the deadline for the appeal brief submission, which was requested by the regulator and now falls in January 2025, means that the conclusion of this particular case will be delayed.

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2024-10-26 00:25