Pro-XRP Lawyer Celebrates Court Wins Against SEC's Crypto Rules

Judges Push Back Against SEC's Crypto Stance

Pro-XRP lawyer Bill Morgan has recently spotlighted a series of legal victories where federal courts have challenged the U.S. Securities and Exchange Commission’s (SEC) approach to cryptocurrency regulation. Morgan argues that these rulings are significant setbacks for the SEC's efforts to classify digital tokens like XRP as securities. His analysis points to several key cases where judges have questioned the SEC’s legal arguments, suggesting that the agency's strategy of regulating by enforcement is increasingly under scrutiny.

SEC's Legal Arguments Weakened in Key Cases

Morgan identifies three major court decisions that he believes have critically undermined the SEC's position on cryptocurrency regulation. In a series of posts on X (formerly Twitter), Morgan emphasized that these judicial rulings could reshape how cryptocurrencies are regulated in the future.

One of the most impactful cases is the ongoing SEC vs. Ripple lawsuit. In this case, Judge Analisa Torres delivered a significant blow to the SEC by ruling that XRP is not a security. Morgan highlighted this point, stating, “Judge Torres in SEC v Ripple made it clear that the XRP token itself does not qualify as a security.” He further explained that the judge determined XRP does not meet the criteria of a "contract, transaction, or scheme" under the Howey Test, which is a key legal standard for identifying securities.

Another important ruling came in the SEC vs. Payward Inc. (Kraken) case. Here, Judge William Orrick expressed doubt about the SEC's practice of equating cryptocurrency tokens with investment contracts. Orrick famously remarked, “Orange groves are no more securities than cryptocurrency tokens are.” This analogy was part of his broader warning to the SEC to clearly differentiate between the crypto assets themselves and the transactions involving those assets. Orrick advised, “The SEC needs to be cautious in arguing that the individual tokens used in Kraken transactions are securities. Such an argument is unlikely to succeed.”

Morgan also referenced the SEC vs. Binance case, where Judge Ketanji Brown Jackson rejected the SEC’s theory that a crypto token inherently represents an investment contract. Jackson clarified that while a crypto token might be involved in an investment contract, it is not necessarily the embodiment of one. Morgan summarized this by stating, “In SEC vs Binance, Judge Jackson completely dismissed the SEC’s theory that a crypto token is the embodiment of an investment contract, noting it could simply be involved in one under certain circumstances.”

Calls for the SEC to Rethink Its Approach

Morgan’s critique of the SEC’s regulatory strategy culminates in a pointed question: “How many more judicial opinions are needed before the SEC abandons its discredited theory that a crypto asset is inherently a security?” This question reflects growing frustration within the crypto community with the SEC's regulatory approach, which many see as outdated and overly aggressive.

Despite these setbacks, the SEC has not yet changed its stance. In a move that sparked controversy, the SEC recently issued a Wells notice to NFT marketplace OpenSea, claiming that some NFTs on the platform might be considered unregistered securities. This action has been criticized as another example of the SEC’s overreach and reluctance to adapt its regulatory framework to the unique nature of digital assets.

Morgan’s analysis highlights a broader concern in the crypto community that the SEC’s approach to regulating cryptocurrencies by enforcement is increasingly at odds with the realities of the digital asset market. As more federal judges push back against the SEC’s efforts to label cryptocurrencies as securities, the agency may be forced to reconsider its strategy and develop a more nuanced regulatory approach. Until then, the battle over how cryptocurrencies should be regulated in the United States is likely to continue in the courts.