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Ripple ruling is likely to be appealed and overturned, ex-SEC official says

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The Ripple case ruling is “ripe for appeal” and likely to be overturned, John Reed Stark, former chief of internet enforcement at the SEC, noted in a LinkedIn post on July 14.

The court decision, which Cameron Winklevoss hailed as a watershed moment, “resides on shaky ground,” Stark wrote.

Ripple court ruling is ‘troubling on multiple fronts’

According to Stark, the court ruling in the Ripple case is “troubling on multiple fronts.” He wrote that the ruling “seems anathema to the SEC’s mission” of protecting investors.

The court ruled that XRP was sold as a security to institutional investors. Therefore, the Ripple ruling grants institutional investors the protections offered by the SEC. However, since the court ruled that XRP is not a security when sold on crypto exchanges, the ruling does not protect retail investors, Stark noted.

Therefore, the Ripple decision creates a “class of quasi-securities” that “discriminates and morphs” based on how sophisticated the investors are. This discrimination is “counter-intuitive, inconsistent with SEC case law, and unprecedented in this context,” Stark wrote.

Additionally, the court decision declared that tokens sold through exchanges are not securities because exchange customers are “presumed to not know anything about the crypto-issuer,” Stark wrote, adding:

“But merely because an investor is ignorant or unwilling to do research, has never served as a viable defense to a securities violation.”

Stark further stated that the ruling is “not only patronizing but just plain insulting,” because it presumes “retail investors are typically stupid.”

Moreover, Stark believes that retail investors are not as ignorant as the court ruling presumes. Retail investors bought XRP because they believed XRP price will increase because of Ripple, even if they did not know they were supplying capital to the firm, he wrote.

As per the Ripple decision, if

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Author: Monika Ghosh

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