In December of 2020, the Securities and Exchange Commission dropped a bomb on the crypto industry by suing one of its most prominent companies, Ripple, as well as two of the firm's top executives.
The case, which turns on whether Ripple and its executives sold unlicensed securities in the form of the token XRP, poses an existential threat to both the company and the broader industry. If a judge concludes that XRP is a security, Ripple likely will crumble, and the ruling will give the SEC a powerful weapon to go after other blockchain projects.
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But as some have noted, the best lawyers in the world won't help a defendant who's clearly in the wrong. "Hiring Mary Jo White is meaningless—it just means they have a lot of money. You can hire fancy law firms ... but the law is the law," crypto lawyer Stephen Palley, who's skeptical of Ripple's chances, told Decrypt last year.
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All of these procedural developments may, however, prove relatively insignificant in the larger context of the case. According to Preston Byrne, a longtime crypto attorney with Anderson Kill, Ripple is still behind the eight ball when it comes to the so-called Howey Test—a four-part test established by the Supreme Court in 1946 to show whether something is a security.
"The back and forth on the Ripple case is reasonably typical pretrial stuff that doesn't really speak to the merits of the case. I think Ripple's likelihood of success on the merits is low and largely unchanged," said Byrne. "The SEC alleges that the company engaged in a rolling offering of its tokens to the investing public in the manner of an investment contract, a view broadly shared among the members of the American crypto bar."
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