Ripple Labs could receive a response from the SEC by Feb. 15 on its Freedom of Information Act why Ether (ETH) was classified as a non-security.
The chances of the FOIA request being approved are good, and could become crucial to Ripple’s defense strategy against the SEC.
Jesse Hynes, an attorney at Hynes Law Group, discussed in a new YouTube from “Crypto Eri” his take on Ripple Labs’ Freedom of Information Act (FOIA) letter that the company filed as part of its response to the SEC complaint. From the perspective of many, Ripple has made a bold move by requesting information through the FOIA request about how the U.S. Securities and Exchange Commission (SEC) determined Ether’s status as a non-security.
The Freedom of Information Act specifically asks for “all communications with the Ethereum Foundation and/or other relevant entities (including but not limited to ConsenSys) or individuals in the Ether ecosystem (including but not limited to Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, Amir Chetrit, Joseph Lubin, Gavin Wood, and Jeffrey Wilcke), or any attorneys or other individuals, [….], and all documents […] upon which it [the SEC]relied in deciding that Ether is not a security.”
The possible reasons behind Ripple’s FOIA request
As Hynes confirmed, the SEC has 20 days to respond to the FOIA, so a response should appear “around February 14 or 15.” In the attorney’s experience, Ripple has a good chance of receiving a response since the SEC has not yet released a response:
In my experience with it if Ripple is going to be denied, they probably would have already been told the grounds of denials. They usually get back pretty quickly on that.
The SEC also has the ability to extend the deadline for an additional 30 days, although this is usually done when they need to release the information. Hynes, with regard to the SEC vs. Ripple litigation, filed a FOIA request himself to get “all the information” but was denied within 3 days. In terms of why Ripple Labs’ lawyers decided to make the FOIA request, Hynes made two assumptions:
First part is that I do think that we are going the public route for a reason. […] because they would be able to ask for this information in a private sealed discovery way where they couldn’t share it. […]
But second I really think, if this is going to trial, they are seeking information so that they can really compare, you know side-by-side, XRP to Ether. […] they can say look, how come that this crypto is good, and this crypto is bad. I don’t get it. That’s the biggest reason they want this information.
Will the SEC do an about-face under Gary Gensler?
Hynes also speculated on whether the U.S. Securities and Exchange Commission might make an about-face in its stance on cryptocurrencies under its new chairman, Gary Gensler. As is well known, Gensler is well acquainted with the space.
Most recently, Gensler was employed at MIT as a professor of blockchain, digital currencies, financial technology and public policy in the business school and senior advisor to the MIT Media Lab’s influential Digital Currency Initiative. But that’s not the only reason Hynes thinks it’s possible Gensler won’t follow Jay Clayton’s policies:
What I think, and this is total speculation, what I think what Gary Gensler might try to do is he might try to take a step back from prior actions. I heard commissioner Peirce in a few […] talks, and she kept saying ‘This is a fresh start’.
I think Gary Gensler will try for that fresh start. It could look like something as settling with Ripple to the point where they say ‘pay us for the past actions, we not gonna decide whether it is a security.
Nonetheless, Hynes doesn’t think a “win” for Ripple is guaranteed. As Ripple also noted in its response to the SEC, the central issue in the lawsuit will be the definition of an investment contract, and that term, Hynes said, has never really been defined by Congress:
I think they have three really good arguments, but I am not saying that they are winning on any of them. To be quite honest […], Ripple could lose this lawsuit, they really could, and it’s not because I believe XRP is an investment contract. It’s because an investment contract is broad, it could really mean a lot of different things. It was never actually defined by Congress.