Brad Garlinghouse, CEO of Ripple, is confident that the U.S. Securities and Exchange Commission (SEC) will fail in its attempt to classify Ethereum (ETH) as a security, just as it did with XRP. Garlinghouse took to the X platform to express his views on the SEC’s legal campaign against Ethereum.
In his post, Garlinghouse highlighted the significant losses that the SEC has suffered in its legal battles with the crypto industry. He pointed out that since the regulator has been unsuccessful in its fight against the industry, it is now resorting to legal disputes with its sister agency, the U.S. Commodity Futures Trading Commission (CFTC).
Garlinghouse posed a rhetorical question, asking when the SEC would realize that it will lose the battle to classify ETH as a security, just as it did with XRP. He made these comments in response to Paul Grewal, Chief Legal Officer of Coinbase, who expressed support for Ethereum and provided reasons why it should not be considered a security.
It’s worth mentioning that the SEC’s attempt to classify XRP as a security also failed. The regulator tried to bring XRP under its jurisdiction in 2020 when it accused Ripple of offering the coin as an unregistered security to U.S. investors. However, in July 2023, U.S. District Judge Analisa Torres ruled that XRP is not a security. The judge also stated that most XRP-related transactions conducted by Ripple did not constitute investment contracts.
While the SEC failed to classify XRP as a security, it did secure a victory in the summary judgment by proving that Ripple violated the law through its institutional sales of XRP. The penalty for this violation will be determined in the remedies phase of the case.
In its quest to become the main regulator for the crypto industry, the SEC has been suing exchanges like Binance and Coinbase and labeling various crypto assets, including SOL, MATIC, and ADA, as securities. Its recent attempt to classify ETH as a security has surprised many crypto enthusiasts, especially since the commission had previously acknowledged that Ethereum does not fall under its regulatory purview.
If the SEC succeeds in classifying ETH as a security, it would delay the launch of a spot-based Ethereum exchange-traded fund (ETF). Many investors had hoped for an Ethereum ETF approval this year, following the approval of a Bitcoin ETF in January. However, as the SEC moves to bring ETH under its regulatory purview, the chances of an Ethereum ETF launching in May are fading.
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