SEC appeals are having ripple effects
The SEC appealed the court decision in its Ripple case.
Remember: A federal court ruled in 2017 that Ripple’s programmatic XRP sales did not count as unregistered offerings. The court then, in August, ordered Ripple to pay a $125 million penalty — far below the $2 billion the SEC had sought.
Last week, the US Securities regulator appealed this decision.
Now, crypto exchange Coinbase has referenced the SEC’s appeal in a letter to Judge Katherine Polk Failla (overseeing the SEC v. Coinbase suit) — urging the court to grant its own motion for interlocutory appeal from earlier this year.
The court will then be able to determine the appropriate amount of compensation. “would help ensure that the Second Circuit has before it a full account of the legal and practical implications of the SEC’s litigating position — a position that the SEC acknowledged just weeks ago has sown ‘confusion,'” William Savitt is the lawyer who represents Coinbase.
Coinbase told me via email that it was a company on Monday. “remains confident that we are right on the facts and the law.”
The company’s legal bills are proof that it believes this is a battle worth fighting.
Laura Sanders, policy counsel at the Blockchain Association, told Blockworks the SEC’s appellation underscores the need for the court’s input on various fundamental questions. “Namely: Is an obligation past the point of sale required for a secondary-market transaction to involve an investment contract?” She explained.
You are probably aware that the Howey Test is used to determine if something is an investment contract, and thus should be regulated under securities law.
The word “well” is a good one. “Howey” Savitt wrote four times about the letter. The lawyer points out that the SEC appeal confirms this. “the issues presented by Howey’s application to secondary-market digital asset transactions are of ‘industry-wide significance.'”
Arie Heijkoop is a partner in the law firm Haynes and Boone. She said that the appeals court must take into consideration the facts of both cases when it examines them. A ruling on each appeal — which in this case would be made by the same court — would go a long way to determine how digital assets should be treated under current US securities laws.
“And given that the SEC has not shown a willingness to provide official regulation or guidance on these matters, having it settled through litigation seems to be the way to get any clarification with this SEC administration,” He said.
Heijkoop explained that ultimately, the court’s decision about whether or not to grant an appeal motion depends on its appetite for this battle.
“The judges will have to decide whether there is enough in all the pleadings and filings before it to make a big decision that could ultimately steer the industry,” He said. “Or whether they want to see the battle develop and play out further.”
— Ben Strack
$159 Million
CoinShares’ data shows the amount of cash that left bitcoin investments last week. The net outflows from digital asset investment vehicles totaled $147,000,000, which may indicate that investors are adopting a more risk-free strategy.
CoinShares analyst’s attribute the move to Friday’s better than expected jobs report. The markets are anticipating that the Federal Reserve will reduce interest rates next month.
On Our Radar
Happy Monday. The September jobs report is now behind us. This week the focus will be on inflation. Here’s what to watch:
- The minutes from the FOMC meeting last month — when central bankers opted for a large cut of 50 basis points — will drop on Wednesday. Reminder: The dotplot showed that the majority of committee members saw us ending 2024 at a federal fund rate between 4.25 and 4.75%. But the minutes will provide a clearer picture of their reasoning. CME Group reported that Fed Funds futures prices indicated an 84% chance of a 25bps drop in November after Friday’s good jobs report.
- On Thursday, we’ll receive the initial weekly data on jobless claims. Analysts are expecting a slight uptick in first-time filers for the week ended Oct. 5 — calling for 230,000, vs. 225,000 the week prior. After the September jobs report, analysts expect a slight increase, but it shouldn’t frighten markets. Any sign that unemployment is decreasing should be welcome.
- On Thursday we’ll also get the September CPI, and then on Friday, we’ll have the PPI. Analysts anticipate that the core CPI report will show an increase of 0.2% per month, down from 0.3% in August. PPI will also be projected to show a slight decline in prices, as analysts expect a 0.1% rise compared with 0.2% increase in August.
- The University of Michigan consumer sentiment survey will be released, and it is expected to show a slight increase in the number of respondents compared to last month (70.3, versus 70.1). This is a good indicator of how optimistic Americans feel about their finances and economy in general.
Bulletin Board
- Bitcoin’s price surged to roughly $64,300 today before settling above $63,500 just after 2 pm ET — up roughly 1% from 24 hours ago.
- Farside Investors data shows that, as we mentioned earlier, US bitcoin spot ETFs experienced net outflows in the amount of $275 million last week. ETH ETFs also saw negative flows from Sept. 30 to October 4 (about $25 million). Net outflows of $548 millions have been recorded in the latter ETF category since its launch on July 23.
- Crypto.com announced on Monday that it has partnered up with 21.co, a cryptocurrency-focused asset management company. As a preliminary step in the “long-term, strategic partnership,” Crypto.com will provide liquidity for 21.co wrapped bitcoin (21BTC).
- This week is officially Permissionless Week. We’d love to see you all in Salt Lake City.
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