Should crypto investors care about the Ripple lawsuit?

On Behalf of | Apr 15, 2022 | Business Litigation |

Generally, crypto-investors like to get their news and due diligence (known as, “DD” in online forums) from alternative sources. However, one news topic that has brought them onto mainstream news websites is the SEC v. Ripple lawsuit.

SEC v. Ripple lawsuit

While this blog post is too short to get into the extensive back-and-forth on this investment litigation and the political intrigue that has kept this in the news cycle, there are two issues that make it important for crypto-investors generally. First, the SEC wants Ripple’s XRP cryptocurrency to qualify as a security, which the SEC could then regulate. Though, it is the second part of that statement (regulation) that likely will not be settled by this case because of the nature of cryptocurrencies.

Decentralization

Cryptocurrencies are generally not currencies in the traditional sense. While they have value that is imputed by a market, like our current currency landscape, crypto-coins, like XRP, are used to give people votes. They also exist on a blockchain that does not necessarily exist entirely in the United States. As such, the “transactions” themselves may start in the United States, but they may settle elsewhere in the world.

Outside the United States is where the problem arises

Even if the SEC wins on the securitization of the XRP cryptocurrency, this outside of the United States may still mean that the SEC cannot regulate it. According to the U.S. Supreme Court, only securities transactions that occur in the United States can be regulated by the SEC. As such, if the blockchain exists outside of the United States, or if transactions are completed outside the country, then the SEC is not empowered to regulate them. This is why this is of such an interest to crypto-investors.

Securities and investment litigation

As the crypto-space is ever-expanding and changing, the laws that are relevant to the space will be constantly challenged, resulting in a lot of securities and investment litigation for those in Orange County and throughout the United States. Unfortunately, until clear laws are passed to settle the myriad of crypto-issues, litigation will be how disputes are settled.

 

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