JW Verret outlines in an interview with John E. Deaton why XRP holders should expect a “slim victory” for Ripple against the US Securities and Exchange Commission (SEC). The former member of the SEC’s Investor Advisory Committee and an associate law professor at George Mason University in securities law also explained that the uphill battle with Ripple may have taken the agency by surprise.
Verret shared his thoughts in a CryptoLaw live stream, in which Deaton also asked his counterpart why the SEC singled out Ripple in particular, despite it being one of the best funded companies in the crypto industry. CEO Brad Garlinghouse once said that Ripple could spend $100 million in legal fees when the last word is spoken.
The former SEC advisor responded that the agency underestimated the fight and probably expected a settlement. However, given the way things have progressed, it is a far-fetched prediction, he said.
I don’t think he saw it coming and I think he probably expected a deal. He underestimated the fight inside Brad.
Here’s Why XRP Holders Should Expect a “Slim Win” for Ripple
According to Verrett, there is a high probability that the losing party in the SEC v. Ripple Labs Inc. will appeal. If it does, the case could become the vehicle by which the US Court of Appeals for the Second Circuit and the US Supreme Court reopen administrative law for crypto.
However, according to the law professor, the path from the appeals court to the Supreme Court could take four to five years, assuming an appealable summary judgment is granted. The only case in which Ripple wins and the SEC refrains from appealing, according to Verrett, is if the fintech wins based solely on a “fair notice” argument.
“I think that if it is only a fair notice more victory over the argument, […] Obviously this will have little effect for the following cases. And I think the SEC would be unlikely to challenge it. If they lose out on that, it doesn’t cause them problems in other cases, so they can just let it lie,” Verrett said and continued to explain:
But if it’s a big win, the SEC will quickly appeal it. So in a sense if you are an XRP holder, you want to win almost too thin – a win on unbiased information alone.
Continued litigation in higher courts could mean more than five more years of regulatory uncertainty and thus a continued depressed token price for XRP holders. Veret, on the other hand, believes that Ripple and other crypto companies will have a higher chance of success on appeal and before the Supreme Court.
The reasoning behind this is that the Supreme Court has ruled that federal agencies that want to determine a matter of national importance must do so with explicit authorization from Congress. This is referred to as the “leading question doctrine” by lower appellate courts.
Important to this is the case of West Virginia v. US Environmental Protection Agency, where the phrase was first used by the Supreme Court in 2022. According to Verrett, the Supreme Court had previously applied the principle in several decisions.
Among others, the “major question doctrine” was invoked in 2000 in FDA v. Brown & Williamson Tobacco Corp. and in 2006 in Gonzales v. Oregon. According to him, the crypto industry could be a prime example of another application alongside the Howe test.
However, due to the lengthy process, Verrett concluded:
Ultimately, the SEC’s discretion to regulate crypto may be largely constrained by the key question principle. Until then, this hope will be little consolation to crypto entrepreneurs who want to fall into compliance and who just want to understand the rules of the road.
At press time, XRP was priced at $0.3701, continuing the downtrend that began in late January.
XRP price continues to decline, 1-day chart | Source: XRPUSD on TradingView.com
Featured Image from CNBC, Chart from TradingView.com
