In a surprising twist, the United States Securities and Exchange Commission (SEC) decided to drop its case against Ripple executives Brad Garlinghouse and Christian Larsen on October 19, 2023. While this move suggests that the trial scheduled for April 2024 is no longer on the horizon, the financial regulator continues to pursue other aspects of the case against the payment company.

The crypto world, particularly the XRP community, has been abuzz with reactions following this unexpected dismissal. Notably, John Deaton, a lawyer and prominent XRP supporter, has now provided insights into the ongoing legal battle between Ripple and the SEC.

The SEC’s Potential Appeal: There has been speculation about whether the SEC might immediately appeal the case’s dismissal. This discussion emerged in response to crypto trader Ran Neuner’s concerns, who suggested that the SEC could appeal the Ripple case promptly, given the dropping of charges against the Ripple executives. Deaton partially concurred with Neuner, acknowledging the possibility of an earlier appeal due to the dismissal. However, he differed from Neuner by asserting that the SEC cannot appeal against Ripple right away.

According to Deaton, the penalty phase of the case must take place before any appeal, drawing parallels to the LBRY trial’s judgment. Deaton cited the LBRY case as an example, noting that the summary judgment decision was issued on November 7, 2022, while the final judgment that became appealable was entered on July 11, 2023, a span of eight months. An appeal was subsequently filed on September 7, 2023.

Deaton also underscored the significance of the sums involved in these cases. In the LBRY case, the SEC initially sought $23 million in fines but eventually settled for a $130,000 penalty after eight months of negotiations. In contrast, the Ripple case involves a far larger sum, a whopping $770 million. Deaton contended that the negotiation process for such a colossal figure would likely extend well beyond eight months, indicating that an SEC appeal may not occur before 2024.

SEC’s Persistence: Deaton dismissed the idea that the SEC dropped charges against the Ripple executives to expedite the appeal process. Instead, the pro-XRP lawyer argued that the SEC dismissed the case due to its low chances of success. Nevertheless, the financial regulator remains resolute in its lawsuit against Ripple. According to Fox Business journalist Eleanor Terret, the SEC intends to continue pursuing other aspects of the case, notably the classification of all offers and sales of XRP as an investment scheme.

Consequently, the dismissal of the case against Garlinghouse and Larsen has sparked discussions about a potential settlement between the SEC and Ripple.

A Legal Drama Unfolds: The legal battle between Ripple and the SEC has been closely watched, not just by cryptocurrency enthusiasts but also by the broader financial community. It has all the elements of a gripping legal drama – high stakes, conflicting narratives, and significant implications for the cryptocurrency industry.

At the heart of the matter is the SEC’s contention that XRP, the digital asset created by Ripple, qualifies as a security. This classification would subject Ripple to securities laws, necessitating disclosures and regulatory compliance. On the other hand, Ripple vehemently disputes this classification, maintaining that XRP is a digital currency and not a security.

This disagreement forms the crux of the legal dispute. The SEC initiated the lawsuit in December 2020, accusing Ripple and its executives, Garlinghouse and Larsen, of conducting an unregistered securities offering, with XRP being the unregistered security in question.

The SEC’s Surprising Move: The SEC’s recent decision to drop the charges against Garlinghouse and Larsen took many by surprise. It signifies a significant development in the case and has ignited speculation about the SEC’s future strategies. While this dismissal might suggest an opening for an immediate appeal, Deaton’s insights provide a more nuanced perspective.

Deaton’s explanation, grounded in the precedent of the LBRY case, indicates that there is a legal process to follow before an appeal can be initiated. This process involves determining penalties, and given the substantial sum at stake in the Ripple case, it is likely to be a protracted affair.

The Stakes Involved: It’s important to underscore the magnitude of the financial implications associated with the Ripple case. The SEC is seeking a substantial penalty of $770 million from Ripple. Negotiating a settlement or determining the penalties for such a colossal sum is a complex undertaking that requires time and careful consideration.

The SEC’s Motivation: The SEC’s move to drop charges against Garlinghouse and Larsen, according to Deaton, does not signify a sudden eagerness to expedite the appeal process. Rather, it indicates the SEC’s recognition of the challenges it faces in the case. This acknowledgment suggests that the SEC may be reevaluating its approach.

Ripple’s Perspective: From Ripple’s perspective, the dismissal of charges against its executives could be seen as a step toward vindication. It bolsters the company’s argument that XRP is not a security, and it may prompt discussions about a potential settlement that could bring closure to the lengthy legal battle.

Investment Scheme Allegations: While the case against Garlinghouse and Larsen may have been dropped, the SEC is not backing down. The regulator continues to press forward with allegations regarding the classification of all offers and sales of XRP as an investment scheme. This part of the case has the potential to impact not just Ripple but the broader cryptocurrency industry, as it could set a precedent for how digital assets are regulated.

A Potential Settlement: The dismissal of the case against Ripple executives has given rise to speculations about the possibility of a settlement between the SEC and Ripple. A settlement could end the legal wrangling, provide clarity on the regulatory status of XRP, and potentially affect the broader crypto market.

What Lies Ahead: As the legal battle between Ripple and the SEC unfolds, the cryptocurrency industry and its enthusiasts remain on the edge of their seats. The outcome of this case could have far-reaching consequences for how digital assets are regulated in the United States and around the world. While the SEC’s dropping of charges against Garlinghouse and Larsen has injected a dose of uncertainty, the determination to continue pursuing other aspects of the case underscores the SEC’s commitment to its position.