Ripple points out SEC’s repeated misconduct in recent weeks, led by Gensler

Updated: 01 March 2023

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The legal battle between the US Securities and Exchange Commission (SEC) and Ripple Labs continues even now, over two years after the regulator accused XRP of being an unregistered security. The two have submitted their final briefs about a month ago, and are now waiting for a decision.

However, in the meantime, Ripple’s Chief Legal Officer, Stuart Alderoty, has pointed out the SEC Chairman Gary Gensler as a political liability. According to him, Gensler has failed to establish adequate digital asset regulations, despite the fact that 40 million crypto-owning Americans need them to get some clarity and security in the industry.

Marking this as the SEC’s misconduct, Alderoty also pointed out Gensler’s own misconduct, which, according to some, may be his undoing. Specifically, Alderoty said that “Crypto lawyer PSA: Chair Gensler has again proclaimed that every cryptocurrency, except BTC, is an unregistered security. He now must recuse himself from voting on any enforcement case that raises that issue since he has prejudged the outcome. Antoniu v. SEC (8th Cir. 1989)”

Crypto lawyer PSA: Chair Gensler has again proclaimed that every cryptocurrency, except BTC, is an unregistered security. He now must recuse himself from voting on any enforcement case that raises that issue since he has prejudged the outcome. Antoniu v. SEC (8th Cir. 1989)

— Stuart Alderoty (@s_alderoty) February 27, 2023

Alderoty hinted at Gensler’s interview published in New York Magazine, where he openly said that everything apart from Bitcoin is a security. However, this statement indicates that other assets are not being considered adequately and that the SEC Chair starts with an assumption that they are unregistered securities, and from there on, he only seeks ways of proving that assumption, rather than considering all aspects of projects in question.

The SEC chair disqualified himself from voting on crypto-related matters

Alderoty’s tweet cites the case Antoniu v. SEC, where the regulator barred a stockbroker from working with a company for violating federal securities laws. In fact, the regulator initiated proceedings that would permanently prevent the stockbroker from finding work in the securities field. However, during this case, the SEC commissioner made a massive mistake that eventually led to a different outcome than expected. The commissioner called the ban permanent while the proceeding was still pending.

The court decided that this kind of language indicates that the commissioner had prejudged the issue, which violated due process. In light of this, Gary Gensler’s comments on everything but Bitcoin being an unregistered security puts him in the same position. Alderoty points out that Gensler has essentially disqualified himself from participating in any future crypto-related votes, as he automatically approaches the case assuming that the asset is a security.

The SEC was also challenged by the XRP community attorney, after Fred Risoli of Hodl Law sued the regulator two months earlier, requesting that the court declares that Ethereum and its network are not securities.

What shocked the community was the SEC’s motion to dismiss the lawsuit, in which the regulator said that Hodl Law’s own allegations make clear that the SEC has not reached a final decision about Ethereum network or Ether itself.

2/ The SEC has moved to dismiss the case.

It its motion, the SEC makes this startling statement:

"Hodl Law's own allegations make clear that the SEC has not reached a final decision about the Ethereum network or Ether." (SEC memo, p. 11)

Wait, WHAT?

This is astounding.

— MetaLawMan (@MetaLawMan) February 27, 2023