Too Big To Fail: Why XRP Might Escape A Securities Classification

Too Big To Fail: Why XRP Might Escape A Securities Classification

Ripple, the creator of the second biggest virtual currency, may be spared the full wrath of the SEC

It may be too late for XRP to be classed as a security. At least that’s the opinion of two independent legal experts who have explained to Crypto Briefing that any regulatory clarity gained would be far outweighed by costs, or even the negative effects it would have on the sector.

Max Rich, deputy counsel at the crowdfunding platform Republic, thought it was unlikely the SEC would compel Ripple Labs, XRP’s creator, to reimburse investors. He believed authorities would crack down on ICO projects believed to have sold unregistered securities. But the XRP token sale, which took place in mid-2013, could be excluded because it happened such a long time beforehand.

Rich says the SEC will use the DAO debacle, in the summer of 2016, as the cut-off point. Projects that hosted a public sale before may be treated differently to those that happened after that date.“I do think the SEC uses the DAO as an inflection point,” Rich said in an email exchange.

Rich thinks earlier public sales, like Ripple, may still be dealt with by the SEC. That said, they may not be the regulator’s immediate focus. “It’s likely they are using limited resources to address offerings where there are i) principals that can be identified, ii) funds can be traced and clawed back and iii) benefits that can be gotten for the public – an enforcement net benefit,” he wrote.