Following the official withdrawal of the United States Securities and Exchange Commission (SEC) from its lawsuit against blockchain company Ripple, earlier documents have revealed that a former commissioner was urging against proceeding with the case.
As it happens, the William A. Franke Professor of Law and Business at Stanford Law School Joseph Grundfest had pleaded with former SEC Chair Jay Clayton not to sue Ripple, citing widespread implications, according to his pre-suit letter shared by legal expert John E. Deaton in an X post on October 28.
Indeed, in this letter from December 2020, Grundfest, who acted as a commissioner with the SEC for four years in the 1980s – appointed by President Ronald Reagan – had warned that the lawsuit would “implicate a broad range of policy concerns with significant consequences for the nation’s financial and securities markets.”
Harming XRP holders
Furthermore, he had also argued that the implications of such a lawsuit were international and not “narrowly limited to technical matters of securities law interpretation,” adding that “simply initiating the action will impose substantial harm on innocent holders of XRP, regardless of the ultimate resolution.” As he explained:
“Upon learning of the proceeding, intermediaries will cease transacting in XRP because of the associated legal risk. The resulting reduction in liquidity will cause XRP’s value to decline. (…) Given the significance of liquidity to the XRP market, the withdrawal of intermediaries will most likely cause billions of dollars of losses to innocent third-party holders.”
Giving ETH a free pass?
On top of that, Grundfest had called into question the true motives behind filing the lawsuit, which Deaton said could make him “ETHGate’s first conspiracy theorist,” referring to the rumors that Ethereum (ETH) had received a free pass from the regulators, while they treated XRP harshly.
According to the former SEC commissioner:
“The staff has articulated no material distinction between the operation of Ether and of XRP that is relevant to the application of the federal securities laws. Imposing securities law obligations on XRP while leaving Ether untouched raises fundamental fairness questions about the exercise of Commission discretion.”
As Grundfest had added in his letter, the Commission should have treated Ethereum and XRP similarly, allowing XRP to trade freely in the market if it allows Ethereum the same, and subjecting Ethereum to the same restrictions as XRP, stressing that any other practice would create a competitive and inexcusable imbalance “with reference to fair enforcement of the federal securities laws.”
Meanwhile, the XRP token that was at the center of the whole court ordeal was at press time trading at the price of $0.5578, up 0.96% on the day, adding up to the weekly gains of 6.12% and advancing 7.82% on its monthly chart, as per the latest data on October 30.
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