Ripple Labs’ Chief Legal Officer (CLO) Stuart Alderoty expressed concerns over the pattern the US SEC exhibits in flouting the law.
The Ripple CLO is particularly concerned about the regulator’s approach to enforcement under Chairman Gary Gensler. This latest comment comes after a Federal Court of Appeals declared that the SEC acted “arbitrarily and capriciously,” violating the Administrative Procedure Act.
Another day and another Court finds that the SEC again acted arbitrarily and capriciously. Is anyone else concerned about this very troubling pattern of the SEC flouting any faithful allegiance to law under Mr. Gensler? https://t.co/5bUgSBUOI8
— Stuart Alderoty (@s_alderoty) November 1, 2023
This latest verdict came as part of the lawsuit between the regulator and the US Chamber of Commerce, Longview Chamber of Commerce, and Texas Association of Business.
As ruled on Oct. 31, the U.S. Court of Appeals for the Fifth Circuit noted that the SEC violated the Administrative Procedure Act by choosing not to respond to earlier comments from the petitioners in addition to not carrying out an efficient cost-benefit analysis.
Reactions to SEC’s Growing Losing Streak
The SEC has not had the best year, as most of the enforcement actions and legal tussles it faced ended in one form of loss for it or another.
As reported earlier, the United States Government Accountability Office (GAO) spanked the SEC as it publicly confirmed that the regulator broke a rule concerning the guidance it offered to firms operating in the crypto ecosystem in March 2022.
This guidance, contained in the Staff Accounting Bulletin (SAB) No. 121, saw the SEC instructing crypto firms to double-count their crypto holdings on their balance sheets. While the SEC’s justification rests on the risk-on nature of crypto, the GAO noted that providing such guidance without first subjecting it to Congressional Review was unlawful.
This backlash rests on other cases that crypto proponents have called the SEC out for this year. Two prominent examples include the lawsuit against Ripple and its executives, Brad Garlinghouse and Chris Larsen, and the Grayscale Bitcoin Trust (GBTC) conversion request to Bitcoin ETF.
Important Precedents Set
In the Ripple case, the SEC they dropped the charges against both executives in October, complementing the ruling from Judge Analisa Torres on July 13 that declared the programmatic sales of XRP are not securities.
For the Grayscale ruling, the court granted the firm’s petition for review of the SEC’s rejection of its application, setting another important precedent for the industry. In what many consider good faith, the regulator refused to file an appeal to this ruling, further solidifying the confidence that the industry might be closer to securing approval for Bitcoin spot ETF.
The lawsuit’s outcome also pushed Grayscale to file an application seeking approval to convert its largest Ethereum trust product.