Coinbase Lawsuit Hints SEC Won’t Settle With Ripple

An XRP community member said the recent development in the Coinbase insider trading lawsuit suggests that the SEC may not settle with Ripple. 

With a U.S. court recently declaring that certain crypto assets traded on secondary markets are securities, there are ongoing speculations that the case between the SEC and Ripple could be heading to the Second Circuit.

Background of Coinbase Insider Trading Case 

For context, the declaration was made on March 1 in the insider trading lawsuit relating to Coinbase’s former product manager Ishan Wahi, his brother Nikhil, and friend Sameer Ramani.

Recall that the SEC charged the trio with insider trading in 2022. Although the SEC settled its charges against the Wahi brothers in 2023, the court could not arrive at a decision for Ramani because “he fled the country to avoid criminal prosecution” for the charges brought against him in the lawsuit.

Consequently, the court recently issued a default judgment against Ramani, who profited $817,602 from the illicit activity. A default judgment is issued when a defendant does not respond to a court summons.

In the recent ruling, the court emphasized that Ramani engaged in trading selected tokens in the secondary market. It also added that the tokens involved constitute investment contracts under the Howey test.

Diverse Views About Secondary Market Sales

Notably, the ruling could significantly impact the broader crypto market as many stakeholders have argued that crypto assets sold on secondary markets are not securities.

For instance, the SEC v. Ripple case saw a federal judge declare that the defendant did not violate federal securities laws by selling XRP to retail investors through programmatic sales on digital exchanges.

Conversely, U.S. District Judge Jed Rakoff disagreed with Judge Analisa Torres’ reasoning in the SEC case against TerraForm Labs.

No Settlement Until Second Circuit Affirms Ripple Victory

With another district court declaring that certain crypto assets traded in the secondary market constitute securities, there are speculations that the Ripple case will not end in a settlement until the Second Circuit affirms Judge Torres’ decision.

A popular XRP community member, Prosperity Fund, shared the speculation on the X platform.

🚨Breaking: Another District Court Judge Rules Secondary Sales of #Crypto on Exchanges ARE #Securities, Similar to #LBRY ruling, & NOT LIKE #Ripple #XRP ruling…Conclusion: #SEC will Not Settle $XRP case with Ripple, at least until the 2nd Circuit Possibly Rules in Ripple’s…

— Prosperity Fund (@prosperity_fund) March 4, 2024

SEC Could Appeal Ripple Victory 

According to Prosperity Fund, the SEC may appeal Judge Torres’ decision in the Second Circuit in an attempt to overturn the ruling.

The SEC had previously moved to file an immediate appeal challenging the ruling. However, Judge Torres denied the request, ordering the securities regulator to hold on until all pending issues are resolved.

At the moment, the only pending issue in the Ripple case is the remedies phase. The stage will determine the appropriate penalty or fine that could be levied against Ripple following its violation of federal securities law by selling XRP to institutional clients.

Legal experts believe the court will issue its final judgment in the Ripple case this year. It remains to be seen whether the SEC will appeal the decision regarding Ripple’s programmatic sales.

Judge Torres’ Decision Won’t Be Overturned

Meanwhile, top legal experts like John Deaton predict that the Second Circuit will not overturn Judge Torres’ ruling.

The prominent legal expert, who recently declared interest in running against Senator Elizabeth Warren in the upcoming U.S. Senate election, stated that Judge Torres issued the Ripple ruling by strictly applying the rules to the facts of the case.

However, if the Second Circuit eventually overturned the decision, Attorney Deaton said the case would still be remanded to Judge Torres, who would likely arrive at the same decision.