Ripple v. The SEC: A Security or a Commodity?
The ongoing Ripple vs. SEC legal battle, which began in 2020 when the SEC charged Ripple for selling "unregistered securities," has ignited a debate over the definition of cryptocurrencies, their use, and which regulatory body should oversee them: the SEC or the CFTC.
With recent developments suggesting that Ripple may have an advantage in the case, the outcome could significantly impact the web3 industry.
Ripple Gains Momentum in the Legal Battle
Earlier this week, Ripple filed a Notice of Supplemental Authority, referencing a case in which Binance.US attempted to purchase Voyager and its VGX token after Voyager declared bankruptcy. However, the SEC intervened, alleging that VGX was an unregistered security.
A judge ultimately rejected the SEC's claim, citing insufficient evidence and highlighting that "regulators themselves cannot seem to agree as to whether cryptocurrencies are commodities subject to regulation by the CFTC, securities subject to securities laws, or neither."
Disagreement Among Regulators on Cryptocurrency Classification
The central issue in this debate revolves around the legal definition of cryptocurrency. Although many investors treat cryptocurrencies as securities, their fundamental nature and function are more aligned with currencies. While not all cryptocurrencies are primarily used as a form of payment, they are less similar to traditional stock shares.
Stablecoins and network tokens like Ether are frequently used for transactions involving NFTs and other web3 services. In contrast, stock shares are not used as a currency for remittance or payment.
Ripple Lawsuit Resolution: A Timeline
Monica Long, Ripple's president, expressed optimism in a CNBC interview, stating she was "very hopeful" that the lawsuit would be resolved before the end of 2023. Long cited support from judges as evidence that the SEC's case against Ripple would ultimately fail.
Nevertheless, the resolution timeline remains uncertain. The SEC continues to exert pressure on the web3 industry, seeking to maintain control over the various businesses, tokens, and services operating on the blockchain.
Potential Impact on the Crypto Market and Web3 Industry
The outcome of this case will have significant repercussions for the web3 industry. If Ripple loses and XRP is deemed an unregistered security, a domino effect could ensue, impacting almost every other crypto token in the market.
A victory for Ripple, placing it under the CFTC's jurisdiction, may not be the ideal resolution either. Cryptocurrencies still serve as an investment vehicle for many, and similar disputes between the CFTC and other web3 businesses could arise.
A more favorable solution may involve establishing a dedicated commission focused on cryptocurrency, NFTs, and the web3 industry. Blockchain technology is more complex than either the SEC or CFTC seem willing to acknowledge. By creating a specialized cryptocurrency commission, the web3 industry would benefit from a more knowledgeable regulatory panel, better equipped to address decentralization and its use in the United States.
