According to Stuart Alderoty, Chief Legal Officer at Ripple, the “SEC is getting battered in the court”, in both Ripple’s case regarding XRP, and, most recently, in Grayscale’s spot Bitcoin ETF case. In which the investment firm won against the US authority after Grayscale initiated a lawsuit against the SEC for rejecting the ETF.
“In our case, it’s been proven wrong, been called hypocritical, lacking faithful allegiance to the law, fined for discovery abuses, and now another distinguished court saying it’s ‘arbitrary and capricious’ – that’s a really big deal.”— Stuart Alderoty (@s_alderoty)
SEC’s hypocrisy on Ripple’s case
In this particular scenario, attorney John E. Deaton brought attention to the language used in a ruling made by Federal Judge Sarah Netburn in July 2022. In her ruling, Judge Netburn highlighted the “hypocrisy” of the SEC and remarked that the agency’s legal representatives did not exhibit a “faithful allegiance to the law.”
Furthermore, legal representative Bill Morgan emphasized that there existed over 20,000 different cryptocurrencies. He pointed out that the SEC’s head, Gary Gensler, “saying all cryptos except Bitcoin are securities without the SEC investigating most of them is a political statement, not a legal statement.”
As reiterated by the legal news organization CryptoLaw in October, Ripple’s CEO Brad Garlinghouse, who had reviewed the Hinman documents, previously expressed that the conduct of the SEC was “shameful.” He predicted that the public would be shocked by the SEC’s actions once the complete truth emerged.
SEC’s denial of Grayscale’s proposal was arbitrary and capricious
On that, the Federal Court ruled (August 29) favorably on Grayscale’s petition — that their request to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF — must be reviewed by the SEC.
“It is a fundamental principle of administrative law that agencies must treat like cases alike. The Securities and Exchange Commission recently approved the trading of two bitcoin futures funds on national exchanges but denied approval of Grayscale’s bitcoin fund. (…)
The denial of Grayscale’s proposal was arbitrary and capricious because the SEC failed to explain its different treatment of similar products. We, therefore, grant Grayscale’s petition and vacate the order.”— RAO, Circuit Judge
Besides all the legal battles, the SEC has also received multiple criticisms from well-known figures in the cryptocurrency market — putting the regulator’s credibility to the test and weakening previous and future related decisions by the US authority in the social consensus and to the public opinion.