Legal expert claims Hinaman’s documents reveal SEC’s plans to intentionally complicate the crypto regulatory landscape.
Freshly disclosed documents related to the SEC’s ongoing litigation against Ripple are shining a light on internal disagreements within the agency, leading to deeper inquiries about its underlying intentions.
These documents, now known as the Hinman papers, concern internal SEC conversations about a 2018 speech by the former director, William Hinman. In the speech, Hinman classified Ether (ETH) as an entity that should not be considered a security.
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Crypto law expert and Hodl Law’s founder, Fred Rispoli, discussed the implications of these documents. According to Rispoli, these documents unveil SEC’s intent to broaden its scope rather than focusing on its core mission: protecting US investors.
These documents are substantively bad for the SEC, but the optics are even more damaging. They demonstrate an SEC clearly more focused on expanding its authority rather than fulfilling its long-standing mission of protecting US investors. They show the revolving-door aspect of agency bureaucracy at its worst.
Rispoli further elaborated that the SEC’s Office of General Counsel recognized that cryptocurrencies could potentially fall into an undefined category.
According to Rispoli, while they don’t classify as securities due to lack of a controlling group, as per the Howey test, they might need regulatory supervision for protecting consumers, similar to other sectors like medication and credit cards.
Rispoli believes that despite cryptocurrencies bearing certain security-like traits, their fundamental attributes differentiate them from traditional securities. Therefore, while regulations are crucial, they shouldn’t be left to securities regulators to determine.
Crypto may have security-like attributes but its unique aspects make it fundamentally different than securities. Hence, there is a need for regulation but certainly not from the power-hungry SEC.
The unveiling of the Hinman documents has opened the floodgates to potential implications for both Ripple and the broader crypto industry. Rispoli predicts that this public revelation will lead to further requests for records from other litigants, Congressional investigators, and FOIA requests.
Reflecting on how these revelations might affect other ongoing or potential legal proceedings within the crypto sector, Rispoli suggests they could bolster “fair notice defense” claims in cases such as the Coinbase lawsuit.
The man argued that these documents could sway judges and juries to question the SEC’s practices that appear to intentionally complicate the crypto investing regulatory landscape.
Rispoli mentioned that his law firm, Hodl Law, has taken the SEC to court to establish that Ether and the Ethereum Network are not securities under federal law. Despite the SEC’s attempts to dismiss the case, Hodl Law plans to present the Hinman documents to underscore the SEC’s alleged evasion of its legal duties and lack of good faith.
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