In a rather surprising turn of events, SEC has granted Ripple permission to sell securities to private investors. This directly contradicts Judge Torres' ruling during the prolonged XRP lawsuit appeal.
Legal experts seem confused by this move but acknowledge there is no clear way to prevent it. Ripple may have a new source of income, but this could potentially undermine the entire legal system.
Does SEC Meet Ripple's Desires?
In recent months, Ripple and SEC have been locked in an appeal process of their prominent legal battle. Although both sides dropped the lawsuit in March, they have been trying to eliminate a restriction from the Gensler era.
This restriction prohibited Ripple from selling securities to small investors.
Their objectively failed attempt through traditional channels led the Commission to try meeting Ripple's request via a waiver, granted the previous Friday:
"Based on the facts and circumstances... the Commission has determined... that there is good cause not to deny the waiver stated therein. Therefore, IT IS ORDERED... that a waiver from applying the disqualifying provision... is granted to Ripple," the waiver states.
What does this mean? Basically, SEC's waiver theoretically meets Ripple's biggest appeal request. Ripple wanted its penalties returned and violations cleared from its legal record, which did not happen.
However, being exempted from the securities sales ban was their most important goal.
An Unprecedented Move
Marc Fagel, a former SEC official and lawyer who has thoroughly studied the Ripple lawsuit, seems completely astonished. In an X (formerly Twitter) thread, he called this move "unprecedented and potentially suspicious," "potentially illegal," and more.
He noted that the cross-appeal presiding judge clearly rejected Ripple's request multiple times. Therefore, Fagel referred to this waiver as "a clear challenge to the court."
However, he emphasized that there is no clear path to block or revoke this waiver:
"Even if it's illegal, who would complain? At least unless XRP investors lose money and ask why SEC didn't stop it," he said.
When asked about potential litigation, Fagel responded:
"Who would file the lawsuit? If Ripple starts selling XRP under the waiver, SEC would clearly not care, and the court cannot act on its own even if it believes the ban is being wrongly violated."
In other words, this waiver represents new territory in cryptocurrency regulation. As long as the company has this waiver, they can argue that any securities sales are completely legal.
In the short term, SEC has provided Ripple with a valuable new income source. These securities sales could fund any ambitious growth plans. XRP enthusiasts have much to be excited about unless someone somehow blocks the waiver.
Looking ahead, however, this represents a strong legal escalation. SEC has already been criticized for unfairly favoring the cryptocurrency industry, and now it is going even further.
In the long term, this could undermine all federal government protections to restrain cryptocurrency.
