The Ripple ruling has positioned John Reed Stark, the former director of the U.S. Securities and Exchange Commission Office of Internet Enforcement, as a prominent cautionary figure in the cryptocurrency industry.
Though the SEC has generally been considered to have suffered by the judgment, Stark has expressed reservations about its stability and the likelihood of appeals and reversals.
He advised the community to exercise caution and refrain from premature jubilation in an article that provoked thinking on July 14.
Stark’s viewpoint is fundamental because of his knowledge and experience in securities law. Despite its initial euphoria, he argues that the Ripple decision should not be immediately praised as a massive triumph for the cryptocurrency industry.
Ripple Jubilation Temporary?
He said:
But IMHO, the decision resides on shaky ground, will likely be appealed at some point, will likely result in reversal and is not necessarily a cause for celebration. (Please don’t kill the messenger.)
Instead, he warns that the decision’s legal basis is far from firm, opening the door for legal challenges that might result in a different outcome.
The court divided Ripple’s offering into three categories: Institutional Sales, Programmatic Sales, and Other Sales, according to Reuters’ article on July 13, 2023.
Stark emphasized that the sale of XRP to institutional investors, which the court deemed to be a security, constituted an illegal sale of securities. These investors have the right to rescind, and Ripple must pay a fine for the infraction, estimated to be worth $720 million.
Stark notes that the Ripple ruling violates the SEC’s mission and authority and raises controversial issues from a variety of perspectives.
XRP market cap currently at $39 billion. Chart: TradingView.com
Stark first disapproves of the SEC’s disproportionate safeguards for institutional and ordinary investors. Retail investors may not have access to the same measures that institutional investors do, including full SEC protection and remedies for violations.
Crypto Regulatory Clarity Still Developing
This disparity in treatment raises questions about whether the choice is consistent to protect all investors.
Stark also doubts a theory that was advanced in the Ripple ruling. The concept is that when Ripple sells its tokens through an exchange, it assumes that securities laws aren’t relevant since it believes that the exchange’s users are uninformed of the issuer.
However, Stark contends that using investor ignorance or inadequate research as a defense for securities breaches is unjustified. Although they may not be aware of it, he maintains that individual investors likely have access to the same information as institutional investors regarding Ripple’s objectives.
Since Stark has previously backed the SEC and has urged investors to follow the law, it is clear that regulatory clarity in the cryptocurrency industry is still developing. He urges the cryptocurrency community to support laws and refrain from making personal remarks.
Featured image from Protos