The legal confrontation between Ripple and the U.S. Securities and Exchange Commission has taken a significant turn following new legal interpretations of a recently issued court order.
According to Fred Risepoli, an attorney closely monitoring the case, the temporary restraining order issued by the court specifically relates to sales.
The institutional sales conducted by Ripple before 2018. This means that the company's current and future sales to institutions remain legal, as long as they do not reflect the structure of those early transactions.
The Securities and Exchange Commission confirms that Ripple's sales of $728 million to institutional investors from 2013 to 2018 constitute illegal sales of unregistered securities under U.S. law.
The judge ruled in favor of Ripple's argument that it did not conduct securities transactions when it sold the digital asset to the public via so-called cryptocurrency exchanges. However, regarding institutional sales during the company's early years, the court agreed with the SEC that they were unregistered securities offerings.
Accordingly, the court cited inflation concerns to justify the issuance of an injunction preventing Ripple from repeating its institutional sales similar to those that occurred in 2018, which involved selling 3% of its holdings.
As a result, a limited injunction was issued to prevent Ripple from conducting similar transactions. However, attorney Fred Risepoli clarified that this does not completely prevent Ripple from conducting institutional sales, but only prohibits it from using the same structure that was previously called into regulatory scrutiny.
Farrell and Morgan weigh in on Ripple's regulatory future.
James Farrell, a legal commentator in the cryptocurrency space, who also discussed the case, agreed with Risepoli's interpretation. He confirmed that the court order does not represent a blanket ban on institutional sales. Rather, it prevents Ripple from violating Section 5 of the Securities Act, which includes the sale of unregistered securities.
Farrell stated that Ripple could theoretically still sell to institutions, provided that the transactions are conducted through the appropriate regulatory channels. He explained that one option is for the company to request a 'no-action letter' from the SEC, which officially ensures that the described activity will not lead to enforcement actions.
Farrell's opinion also aligns with that of former SEC attorney Mark Fagel. The attorney expressed his belief that the SEC will eventually drop its appeal - a decision that would finally end the four-year legal confrontation. However, he added that the appeal is still ongoing, so the case can be considered 'active.'
Another prominent attorney, Bill Morgan, added a new angle to the discussion, stating that a settlement cannot be finalized unless the SEC is compelled to vote again to approve the terms. This is noted in light of the layers of regulatory processes still in effect.
Ripple adapts its strategy to maintain regulatory integrity.
With legal developments still pending, Ripple has revamped its strategy for selling its tokens to large-cap institutions. The company's management states that it no longer engages in trades that would raise the scrutiny of the U.S. Securities and Exchange Commission (SEC).
There has been a deliberate change in its strategy regarding how it manages XRP sales since 2018. The company has intensified disclosures, held talks with regulators, and even considered filing registration statements for stricter compliance.
However, the proactive strategy is far from its old approach based on keeping sales confidential.
Some analysts also see that the change in leadership at the U.S. Securities and Exchange Commission may bolster Ripple's revised strategy. Although the former SEC chairman, Gary Gensler, was considered anti-cryptocurrency, the change in leadership and regulations may pave the way for a more balanced perspective. This could reduce the likelihood of further legal action against Ripple due to its institutional activities.