John Reed Stark, a former attorney for the United States Securities Exchanges Commission (SEC), has voiced reservations about the recent Ripple judgement, warning against premature jubilation in the cryptocurrency industry.
After a lengthy legal battle, the blockchain company won a partial triumph when a judge ruled that XRP was not a security.
While the ruling has been largely seen as a setback for the SEC, Reed wrote on July 14 that he thinks the decision stands on “shaky ground” and might be overturned in an appeal.
But in my opinion, the ruling rests on fragile footing, is ripe for appeal, will likely be reversed, and is not necessarily anything to celebrate. Reed pleaded, “Don’t shoot the messenger.
The former SEC employee believes the Supreme Court will reverse the lower court’s programmatic and other sales decisions. Without this change, he predicts the rise of PBTs or programmatic buyer tokens.
“Otherwise, get ready for a new crypto-iteration — PBTs — programmatic buyer tokens, available on your friendly neighbourhood (and unregistered and unregulated) crypto-trading platform,” he warned.
Reed said that the judgement conflicts with the SEC’s mandate and jurisdiction on numerous fronts. He brought out two fundamental issues with the Ripple ruling. First, he blasted the SEC for allegedly favouring larger investors over regular people.
The attorney pointed out that the SEC protects institutional investors and provides remedies for infractions, but individual investors are not afforded the same protections. This unequal treatment makes one wonder whether the SEC’s judgement is consistent with its mandate to safeguard all investors.
In addition, he cast doubt on the Ripple decision’s premise that the sale of a crypto-issuer’s tokens on an exchange triggers an exemption from securities legislation on the grounds that clients of exchanges are assumed to be uninformed of the issuer.
Reed maintains that there is no defence for securities breaches based on an investor’s lack of knowledge or investigation. Although individual investors may not have realised they were funding Ripple, Reed argues that they were likely privy to the same information as large financial institutions.
“In addition, I reject the notion that the average investor is so naive. While the buyers may not have realised they were funding Ripple, he believes they had the same understanding of the company’s goals as the institutional investors. “
