Ripple Ruling Could Bring an End to Regulation by Enforcement

• The SEC recently had a no-good, very bad day due to a district judge’s ruling in the SEC’s action against Ripple’s XRP token.
• This decision has the potential to end the SEC’s regulation-by-enforcement approach to crypto assets.
• Congress is currently advancing legislation that would create a regulatory framework for crypto assets.

Ripple Ruling: Could it be End of Regulation by Enforcement?

A long-awaited district judge’s ruling that some XRP token sales were not investment contracts could potentially lead to an end of the Securities and Exchange Commission (SEC)’s regulation-by-enforcement approach to crypto assets, as Congress is advancing legislation to put a regulatory framework around crypto assets.

SEC’s Bravado vs Reality

Despite issuing a statement filled with bravado and the kind of detachment from reality that might make even Donald Trump think twice before pressing send, the SEC likely knows how serious of a rebuke its overall approach to crypto received in a federal court. If the ruling holds, we may be witnessing the beginning of the end of SEC Chair Gensler’s regulation-by-enforcement approach to crypto assets.

Long History of Crypto Policy Debate

To understand why this policy debate has changed and its import on what rules tokens will be required to abide by, one must consider the long, winding road that cryptocurrency policy has traveled. There has been strong support from both Republicans and Democrats in Washington for bringing cryptocurrency into regulatory perimeter.

Rise of Activists Who Adopted “All Tokens are Securities” View

“All tokens are securities” was adopted with religious fervor by activists in Washington D.C., despite it potentially being entirely predictable for many.

Importance Of District Court Ruling

The district court’s ruling comes at an important time as policy debate advances their legislation to put a regulatory framework around cryptocurrency. The courts will take months and appeal may or may not be made; however, this does not change greater reality laid out by district court’s ruling.