SEC Must Turn Over Emails About Ethereum—But It Won’t Help Ripple, Lawyers Say

Ripple notched another procedural victory late this week in its ongoing legal battle with the Securities and Exchange Commission, which sued the crypto payments firm in 2020 for the unregistered sale of $1.3 billion worth of XRP—a cryptocurrency originally created by Ripple's founders.

On Thursday, a federal district judge overruled the SEC’s repeated attempts to prevent Ripple from accessing internal SEC emails pertaining to a key speech on the regulatory status of competing cryptocurrency Ethereum. Ripple believes the emails will help its case and shed light on the ways in which the SEC has “picked two winners” in the crypto space, Bitcoin and Ethereum, while shunning the rest. 

Legal experts who spoke to Decrypt, however, were dubious about the ruling’s significance and the likelihood it will increase Ripple’s odds at beating the SEC’s lawsuit. 

A magistrate judge previously granted Ripple access to those emails, which contextualize a 2018 speech in which former top SEC official William Hinman stated that Ethereum was not a security because it was “sufficiently decentralized.” For months, the SEC attempted to nonetheless withhold the documents from Ripple’s counsel; yesterday’s overruling has forced the agency to now produce them. 

In the hours following the decision, XRP’s price jumped just over 15%, to $0.49. Ripple’s advocates celebrated the ruling as a major victory not only for the company in its lawsuit against the SEC, but also for the crypto industry as a whole in its broader fight against government regulation. 

“What Ripple’s hoping to find [in these emails] is a smoking gun, a juicy quote, that four years ago the SEC said Ethereum wasn't a security and here’s the reasoning and if you apply that reasoning to XRP, that’s not a security either,” Adam David Long, an attorney specializing in Web3, told Decrypt. 

But Long believes that even if such a smoking gun exists, its relevance to Ripple’s case is tangential at best.

“This is going to come down to what Ripple said and what people reasonably believed, when they bought [XRP],” said Long. “And what somebody debated internally in the SEC about a speech, I’m going to be surprised if that materially moves the case.”

Further weakening the potential legal importance of those internal SEC correspondences, ironically, is the language of Thursday’s ruling granting Ripple access to those emails.

The federal district judge overseeing the lawsuit ruled yesterday that Ripple had a right to view the SEC’s emails in part because they would at most reveal Hinman’s personal opinions, and nothing related to “some form of agency position, decision, or policy.”

“The reason Ripple got the documents may be a reason they don’t help their case,” a law professor familiar with the matter told Decrypt. 

Mike Handelsman, a partner at crypto law firm Kelman PLLC, similarly expressed skepticism about the potential relevance of Hinman’s emails to Ripple’s case. 

“Bias on the part of Hinman in favor of ETH seems to be irrelevant to the ultimate issue in this case, i.e., whether XRP is a security,” Handelsman told Decrypt. 

If Handelsman believes the Ripple’s community’s understanding of the significance of this week’s ruling is flawed, though, that doesn’t mean he disagrees with their framing of the stakes of the case. 

“The industry needs Ripple to win,” Handelsman said. “If the SEC is successful in this case, I expect the enforcement floodgates to open. If the SEC loses this case, it will be quite a setback for them and their ‘regulate by enforcement’ plan.”