The U.S. Securities and Exchange Commission (SEC) has drawn sharp criticism from Ripple executives following its decision to amend its complaint against Binance.
The SEC’s amended filing against Binance focuses on several crypto assets it deems securities, which has led to debates over regulatory clarity and consistency within the industry.
Ripple’s Stance on SEC’s Regulatory Actions
Ripple executives have not held back their discontent with the SEC’s regulatory approach, especially in light of the recent amendment to the complaint against Binance.
The amended complaint lists “Third Party Crypto Asset Securities,” including SOL, ADA, and SAND, among others.
This move follows the SEC’s lawsuit against Binance Holdings and its former CEO, Changpeng Zhao, alleging various violations, such as misleading customers and operating as an unregistered exchange.
Stuart Alderoty, Ripple’s Chief Legal Officer, criticized the SEC’s inconsistency on X (formerly Twitter). He pinpointed the contradiction in the agency’s regulatory stance.
When a judge signals B.S. on the SEC’s claim that 10 tokens on Binance are securities, the SEC says “never mind.” But these tokens are left out to dry in the Coinbase suit. This isn’t how to regulate. https://t.co/xtfLdXWoO8
— Stuart Alderoty (@s_alderoty) July 30, 2024
He pointed out that while the SEC retracted its claims that ten tokens on Binance are securities, it maintained them as securities in its case against Coinbase.
“When a judge signals B.S. on the SEC’s claim that 10 tokens on Binance are securities, the SEC says ‘never mind,’” Alderoty posted.
“But these tokens are left out to dry in the Coinbase suit. This isn’t how to regulate.”
Ripple CEO Brad Garlinghouse joined in, denouncing the amended Binance complaint as “hypocrisy.”
He argued that SEC Chair Gary Gensler’s statements about clear rules contrast sharply with the agency’s inconsistent enforcement.
More evidence of SEC hypocrisy.
Chair Gensler testifies the rules are clear, yet his SEC can’t figure them out and applies them haphazardly, festering more industry confusion.
A political agenda and/or bad faith litigation tactics. Def not a “faithful allegiance to the law”. https://t.co/iX8IdvaW92
— Brad Garlinghouse (@bgarlinghouse) July 30, 2024
“Chair Gensler testifies the rules are clear, yet his SEC can’t figure them out and applies them haphazardly, festering more industry confusion,” Garlinghouse tweeted.
This criticism comes amidst Ripple’s ongoing legal battle with the SEC, which accused the company of raising $1.3 billion through the sale of XRP, which the SEC also claimed to be an unregistered security.
A ruling by Judge Analisa Torres last year partially favored Ripple, stating that some XRP sales did not violate securities laws due to the nature of the transactions. In contrast, other sales to institutional investors were classified as securities.
A Potential End to the “Un-ending Security War” from SEC
The SEC’s recent actions affected various firms and caused a last-minute commotion within the market.
Justin Slaughter, policy director at Paradigm, suggested that the SEC’s retreat in the Binance case could be a strategic move to avoid further unfavorable rulings.
Basically, the judge was signaling she was likely to find that the tokens were all not securities at all times, which is what the SEC is seeking.
So rather than take another bad loss on the beware of their approach, they’re backing down.
— Justin Slaughter (@JBSDC) July 30, 2024
He noted that the judge in the Binance case indicated a likely finding that the tokens were not securities, prompting the SEC to adjust its stance.
“So rather than take another bad loss on the beware of their approach, they’re backing down,” Slaughter said.
However, he emphasized that this retreat seems limited to the Binance case, with no similar indications in the ongoing Coinbase case.
Last year, the agency sued Coinbase for operating as an unregistered exchange, broker, and clearing agency, including claims that numerous cryptocurrencies, such as SOL, ADA, and MATIC, are securities.
Ripple’s executives argue that the SEC’s inconsistent and unclear regulatory framework hampers the industry’s growth and creates confusion.
Garlinghouse’s critique can be seen as the broader industry concern that the SEC’s approach lacks transparency and consistency, particularly under Chair Gensler, which the community detests.
The SEC’s intention to amend its complaint against Binance could provide a brief respite for investors in Solana, Cardano, Polygon, etc. The motion to amend is due within 30 days of the court’s scheduling order.
Notably, the statement did not mention Ripple, which remains embroiled in a legal dispute with the SEC over accusations of selling unregistered securities.
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