A comprehensive update on the Ripple trial

I started to lose track, so I thought I'd share an update with you. The parts are taken from a paywalled article on Seeking Alpha by James Foord.

What's happening:

The long-lasting legal brawl between the US Securities and Exchange Commission (SEC) and Ripple Labs, the firm behind the popular cryptocurrency XRP (XRP-USD), has taken interesting turns over time. Regulators, interested parties, and the crypto community have waited for more than two years to hear the final verdict. The outcome of the lawsuit is considered an important factor in determining the future of crypto regulation and giving a clearer picture of where securities laws apply in crypto token offerings. Analysts and top crypto lawyers suggest that a summary judgment ruling may be imminent.

The Hinman Document Fiasko:

In the course of the SEC-vs-Ripple legal battle, several motions filed by the SEC have been denied by the courts. The SEC had earlier filed a motion, in December 2022, to block Ripple Labs from having access to compiled documents related to the controversial June 2018 speech made by SEC's former Corporation Finance director William Hinman at the Yahoo Finance All Markets Summit.

The Hinman Speech Documents, which the SEC had sought to seal, are made up of internal emails, memos, text messages, and expert opinions that followed the Hinman 2018 speech, in which Hinman stated:

Putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network, and its decentralized structure, current offers and sales of Ether are not securities transactions. Source: William Hinman

The SEC has called the controversial speech "Hinman's own opinion, which does not represent the opinion of the SEC."

The SEC has long argued that the Hinman Speech Documents are irrelevant to the case and should be sealed; however, Judge Analisa Torres, on May 16, denied the SEC's motion to seal the documents, meaning the documents will eventually be made public.

Top Lawyers Weigh In

Based on analysis by top crypto lawyers, the next logical step to follow Judge Torres' denial of the SEC's motion to seal the Hinman documents will be for both parties - the SEC and Ripple Labs - to reach an agreement on how and when the Hinman documents will be released.

A notable Australian-based and pro-XRP lawyer, Attorney Bill Morgan, has asserted that XRP cannot be deemed a security by the SEC. Attorney Morgan hinted at the fact that Ripple Labs has transitioned from institutional sales of XRP to sales to On-Demand Liquidity (ODL) clients. The attorney said XRP use in ODL does not satisfy any of the elements of the Howey Test.

Attorney John Deaton, the founder of CryptoLaw, weighed in on the probable outcome of the lawsuit. Deaton pointed to the 2018 Hinman speech, calling it a speech that has a lot of input from top SEC officials to be called Hinman's personal opinion. According to Attorney Deaton, the Hinman Speech Documents comprise a total of 63 emails and 52 unique drafts from top SEC officials, which he calls "a lot for a personal opinion."

Attorney Fred Rispoli, the founder of HODL Law, a law firm dedicated to the unique issues of digital assets and cryptocurrencies, believes that Ripple Labs has a better chance of winning the case against the SEC. He also believes that a summary judgment ruling is near. He shared his insights in an interview with Tony Edward of the Thinking Crypto podcast.

Expensive Lawsuit

According to a CNBC news report, Brad Garlinghouse, CEO of Ripple Labs, revealed to CNBC's Dan Murphy in a fireside chat at the Dubai Fintech Summit that by the end of the legal brawl with the SEC, Ripple Labs will have spent $200 million.

Crypto Tokens Can Evolve

We have witnessed instances when a crypto coin or token supposedly transitions from being a security to a non-security. Polkadot, for example, is one of the tokens that have made this transition, according to the Web3 Foundation. In a Twitter thread posted on January 26, the Web3 Foundation announced that the Polkadot's native coin DOT (DOT-USD) had morphed into a non-security.

Using a similar argument, Attorney John Deaton asserted in a Twitter thread, published earlier this year, that XRP remains a "digital code" even if it was sold as an investment contract.

tl;dr: The case is expected to come to a conclusion soon (this time for real!) and it is looking quite good for Ripple.