- Ripple could seek exemption from Section 5 of the 1933 Securities Act for XRP sales to accredited US investors.
- There was no fraudulent activity.
- The US lacked a regulatory framework for the US digital asset space.
Hints from the SEC Motion to Compel
The SEC opening brief will highlight whether Ripple continued to breach Section 5 after the complaint. Ripple could face a punitive disgorgement if XRP sales to US institutional investors continued after the complaint.
In February, the court granted an SEC Motion to Compel. Judge Sarah Netburn stated,
“The SEC credibly argues that the District Judge may consider post-complaint conduct when determining whether an injunction is necessary and just.”
Judge Netburn also articulated the court would consider the defendant’s wealth in determining the size of a penalty.
In January, the SEC filed a Motion to Compel, asking the court to order Ripple to provide,
- Financial statements for 2022/2023.
- Post-complaint contracts governing institutional sales.
While the focus remains on the final stages of the SEC vs. Ripple case, SEC plans to appeal against the Programmatic Sales of XRP ruling could extend the case into 2025.
Significantly, the SEC will unlikely consider XRP-spot ETF applications until after the appeals process.
Events Influencing SEC Plans to Appeal
Beyond the SEC v Ripple case, other events that could influence SEC plans to appeal are,
- The SEC v Coinbase case (COIN): Court ruling on the Coinbase Motion to Dismiss (MTD).
- An Office of Inspector General investigation into crypto conflicts of interest within the SEC.
- US Presidential Election: Republican front-runner Trump has softened his stance on crypto. A Trump victory could end SEC Chair Gary Gensler’s reign over the US crypto market.