Saturday, July 20, 2024

The Southern District Court of New York made a pivotal ruling earlier this month, deciding that the institutional sales of XRP undertaken directly by Ripple are to be considered securities sales. Interestingly, the court made a clear distinction that XRP sales taking place on secondary markets, particularly cryptocurrency exchanges, are exempt from this classification. The impact of this ruling on the cryptocurrency landscape has been nothing short of seismic, threatening to usher in a tide of regulatory confusion for the U.S. Securities and Exchange Commission (SEC).

Joseph Collement, General Counsel at, shares his perspective on this issue in the following opinion piece.

This judicial decision echoes the controversial 2018 Hinman speech, which the SEC strenuously tried to exclude from the Ripple case’s body of evidence. The author of this speech, Hinman, was conspicuously erased from the SEC’s official website in June 2023, causing a mix of surprise and concern among cryptocurrency enthusiasts. The resonance of Hinman’s 2018 discourse is now palpable in the SEC’s vacated hallways.

Who Is William Hinman, and Why Is His Speech Significant?

William Hinman played a critical role in the SEC as the Director of the Division of Corporation Finance from 2017 to 2020. On June 14, 2018, Hinman proposed a concept that was both intriguing and challenging. He suggested that cryptocurrency startups could initially issue tokens as securities to raise capital, and then transition them to non-security utility tokens once their networks are operational, and the tokens have a practical purpose.

This viewpoint acknowledges the evolving nature of digital assets and how their regulatory classification can transform over time, reflecting the practical circumstances of cryptocurrency projects. SEC Chairman Jay Clayton supported this flexible approach to crypto token regulation in 2019, highlighting an appreciation of the economic reality that projects may meet the criteria of the Howey test for securities at their launch, but this status can change as they mature.

The SEC’s Reversal and the Unfolding Drama

The SEC initially opposed the inclusion of Hinman’s speech as evidence in the Ripple case, making two main arguments. Firstly, the speech was not indicative of the SEC’s official position. Secondly, the speech was considered privileged, due to Hinman’s role as the Director of Corporation Finance. However, the court was unconvinced by the SEC’s points and declared the speech admissible on a limited basis.

In a surprising act, the SEC erased Hinman’s presence from its official website on June 6, 2023. This action did not escape the notice of the ever-watchful crypto community, emphasizing the extent to which the SEC was prepared to go to hinder Ripple from leveraging Hinman’s perspective in their defense.

What Could This Mean for the SEC?

If the Ripple verdict is


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