Former SEC Official Predicts: SEC 'Will Lose Case Against Ripple'

A former SEC official believes there is a good chance the regulator will lose the $1.3 billion lawsuit against Ripple.

Attorney Joseph Hall also expressed concern about the final outcome of the SEC’s case against Ripple (XRP), which will have repercussions for the entire industry.

The suit alleges that Ripple and its co-founders Brad Garlinghouse and Christian Larsen failed to notify the SEC that it was selling XRP starting in 2013 and that the tokens were unregistered securities. The SEC is trying to prove that securities fraud occurred.

Hall, the former director of policy management at the SEC, appeared on the Thinking Crypto podcast with host Tony Edward on Feb. 22, saying:

"I'm not entirely sure what the SEC plans to prove in the XRP lawsuit."

The implications for the SEC and the entire crypto industry are huge. As Hall puts it, “the SEC has a lot of leverage on the case” and “if they lose on the merits, their entire regulatory program could basically be halted”. He continued:

"And I still think there's a good chance the (SEC) will lose."

According to Hall, Ripple has a strong defense that the SEC failed to give fair notice of its investigation. The SEC must notify individuals and companies that they are under scrutiny.

"I very much agree with that statement. It's a basic due process argument. Ripple was running for years before a last-minute lawsuit was filed against them."

Another lawyer who has followed and commented on the Ripple case, Jeremy Hogan, also believes that Ripple's fair notice defense will be enough to keep it out of the proverbial trouble. In a Feb. 23 tweet, he cited precedent from the SEC’s case against Library Credits (LBRY), which was struck last March for its failure to give fair notice.

Well...in the LBRY case, LBRY actually asserted the fair notice defense and not only wasn't hit, the SEC didn't even try to fight it.

So it matters how the trial court came up with an entirely different aggressive defense in this case... I don't understand.

— Jeremy Hogan (@attorneyjeremy1) February 22, 2022

The Ripple case, once ruled, is likely to set the tone for investigations and lawsuits related to cryptocurrencies for the foreseeable future. If the SEC prevails, it could begin a raft of new investigations and court proceedings against crypto projects. If Ripple wins, it could force the SEC to significantly reduce its crackdown on the crypto industry.