SEC Official Predicts Reversal of Ripple Ruling: Shaky Ground

Updated: 10 months

• The U.S. Securities and Exchange Commission (SEC) recently ruled against Ripple, alleging it sold unregistered securities in the form of XRP tokens
• John Reed Stark, a former SEC official, believes the ruling is “shaky” and will be overturned on appeal
• Judge Torres found that Ripple’s automated sales of XRP did not constitute security offerings, but direct sales to institutional participants did

Former SEC Official Predicts Reversal of Landmark XRP Ruling

A former high-ranking official of the U.S. Securities and Exchange Commission (SEC), John Reed Stark, thinks the recent ruling in the regulator’s high-profile lawsuit against Ripple is primed for reversal on appeal. In a new LinkedIn post, Stark states the US District Judge Analisa Torres’ ruling “resides on shaky ground.”


The SEC launched the lawsuit against Ripple in 2020, alleging that San Francisco payments company sold XRP as an unregistered security. On Thursday Judge Torres ruled that Ripple’s automated, open-market sales of XRP – referred to as programmatic sales – did not constitute security offerings; however she sided with the SEC in regard to direct sales of XRP to institutional participants being considered securities offerings. A separate order setting a trial date for Ripple and the SEC has yet to be issued “in due course.”


Stark analyzes that this decision counterintuitively establishes “a class of quasi-securities” which change designation based on buyer sophistication level. He notes that this cannot be right since “stock is always stock – it can’t transmogrify into ‘not stock.'” As such he concludes his take is that at some point the SEC will appeal this decision to the 2nd Circuit and overturn rulings related to both programmatic and other sales of XRP tokens.


If overturned upon appeal this would have major implications for both investors and issuers as retail investors would receive less protection from ignorance or willful blindness while token issuers would face less disclosure liability regarding their tokens offered on markets.


John Reed Stark’s analysis suggests that despite recent court ruling favoring Ripple’s automated sales program, there exists an opportunity for an appeal which could reverse these findings establishing more regulatory clarity within cryptocurrency markets moving forward.

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