John Reed Stark, former SEC official, wrote a post on LinkedIn which detailed his thoughts on the development of the SEC lawsuit against Ripple. Stark notes that Ripple’s victory, while partial, “is happening on shaky foundations.” But he acknowledges that this is a blow not only to the SEC, but also to its chairman, Gary Gensler.
The decision on the SEC lawsuit against Ripple is divided into three categories.
- Institutional sales: This category of sales to experienced investors and individuals through a written contract is considered collateral.
- Programmatic sales: The second category includes the sale of XRP exchanges, and the court ruled that XRP is not a security.
- Other sales: These include the sale of XRP to insiders, retail investors via exchanges, and founders. In this case, the XRP token is not a security.
The former SEC official notes that because of this categorization, “Ripple’s decision causes problems on several fronts.” He further explains that this decision “establishes a class of quasi-securities that distinguishes and transforms depending on the complexity of the investor buying the security.” This, according to Stark, is “illogical, inconsistent with SEC case law, and unprecedented in this context.”
Regarding the topic of converting XRP into a security and back depending on the class of investors, John Reed Stark notes that this argument “seems to be contrary to the sacred and basic principles of investor protection.”
Finally, Stark adds the interesting interpretation that this decision means that only wealthy investors receive “protection” from the SEC, and less sophisticated and retail investors do not.
“In other words, the rich get support and redress opportunities, while the poor get a disclaimer. This seems unfair and goes against the very foundation of US securities law.”
While there is a real possibility that the decision in favor of Ripple and XRP supporters may be reversed, it will take some time for it to go through due process and a final decision be made.