After the momentous Ripple XRP judgment, Coinbase is more certain than ever that its lawsuit against the SEC will succeed

The U.S. exchange’s legal leader told CNBC on Friday that a crucial court decision that largely favored cryptocurrency company Ripple has reinforced Coinbase’s claims in its legal dispute against the U.S. Securities and Exchange Commission.

The purchase of XRP tokens through exchanges was not deemed to be a security transaction on Thursday by a U.S. judge. In 2020, Ripple, the organization that created the XRP coin, was sued by the SEC on grounds that it had violated securities laws.

The cryptocurrency community, notably exchanges, who believe the decision will contribute to more regulatory certainty, applauded the decision.

One such exchange is Coinbase, which was sued by the SEC in June on allegations that it ran an unlicensed broker and exchange.

However, Coinbase is now more confident in its case against the SEC as a result of the most recent XRP court ruling.

According to Paul Grewal, chief legal officer at Coinbase, in a TV interview with CNBC on Friday, “For exchanges, for tokens that are listed on exchanges, for regular investors, there’s no question that this ruling strikes a blow to the idea that somehow securities are being traded when people go onto exchanges and trade the assets”.

“I think we will win. Now, I thought we would win before this decision. We think this decision has only further strengthened the case,” he continued.

The judgment that XRP is not a security contributes to Coinbase’s optimism. There is optimism that hundreds of other cryptocurrencies will not be governed by security rules if XRP is not labeled as such.

“I think it would be a mistake to assume that, in every instance, and in every transaction, the securities laws do not apply. That’s never been Coinbase’s position, I don’t think it should be anyone’s reasonable position. But if you literally replaced the letters XRP with the letters for any other token, in this decision, the logic still holds,” Grewal stated.

Selling XRP only to knowledgeable buyers or institutional clients, however, was really considered a securities transaction according to another section of the ruling.

The development of Coinbase’s own institutional trading platform has been a priority. Grewal ignored this aspect of the issue since it was directly relevant to the method through which Ripple marketed XRP to institutional customers.

« I think all investors, institutional and retail, can take great comfort from the fact that, when it comes to exchange trading, where there is arm’s length dealing, the court has made it very clear, these tokens are not being traded as securities, » said Grewal.

SEC gets criticized

A crucial topic with numerous consequences is whether or not cryptoassets constitute securities. In the event that they are regarded as securities, they will need to register with the SEC and must comply with stringent disclosure rules. Furthermore, it would grant the SEC the authority to regulate these assets and associated businesses, such bitcoin exchanges.

The SEC has insisted that most cryptocurrencies are securities, but the XRP judgment seemed to undermine this claim.

Over the last month, the cryptocurrency sector has exchanged sharp criticism with the SEC, charging that the organization regulates by enforcing regulations rather than by cooperating with the sector.

The co-founder of the cryptocurrency exchange Gemini, which is also the target of an SEC lawsuit, Tyler Winklevoss, referred to the agency as a « failed institution. »

Grewal stated that he did not believe the SEC was engaged in an ideological conflict with the cryptocurrency sector and that all measures were taken in « good faith. » But, he said, « they’ve been wrong. »

Grewal called for « new rules to deal with a new technology » and said that « leadership has failed to follow reasonable engagement with the industry and with other stakeholders, rather than resorting to court. »

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