The US SEC has released the long-awaited Hinman emails as well as documents related to former commissioner William Hinman’s speech on digital assets in 2018, and the documents could tip the court battle in Ripple’s favour.
According to the recently revealed SEC documents, the agency had cautioned Bill Hinman, the former director of the SEC's corporate finance division, about the potential confusion that could arise from the wording of his speech regarding the classification of Ether (ETH) as a security.
The emails indicate that the speech, delivered in June 2018, presented a list of factors that the SEC might consider when determining the security status of a digital asset. However, some agency members criticized the speech for not aligning closely with the Howey analysis, a widely referenced standard for assessing investment contracts. They also noted that the speech contained ambiguously worded statements and included factors that seemed unrelated to securities laws, such as the ability to "hoard" an asset.
“As written, it may not be apparent to the reader which characteristic or factor weigh against it being a security or not,” -- SEC
The significance of Hinman's speech lies in its connection to the ongoing lawsuit between the SEC and Ripple. The SEC argues that the sale of XRP in 2013 constituted an unregistered securities offering. Ripple, on the other hand, contends that Hinman's characterization of Ether as a commodity would also exclude XRP from being classified as a security, as it was sold in a similar manner.
The release of these emails has added to the controversy surrounding the case, with Ripple’s legal team fighting for months to get Bill Hinman's emails from the SEC as crucial evidence in defense against a lawsuit filed by the SEC in December 2020, which alleges that Ripple conducted the sale of unregistered securities.
Following the disclosure of the Emails, Ripple’s CEO Brad Garlinghouse expressed strong criticism of the SEC’s choice to release the speech, accusing the SEC of deliberately causing chaos within the industry and of “weaponizing the lack of regulatory clarity”.
Turbulent Times Ahead For Crypto Regulation
The disclosure of the documents comes at a particularly tumultuous period for the cryptocurrency industry, with June 13th also seeing the federal court scheduled to review the SEC's motion to freeze the assets of Binance.US, which is facing multiple legal challenges, and the SEC further requesting time to respond to Coinbase’s request for crypto regulatory clarity.
This is in addition to the "SEC Stabilization Act", which US Rep. Warren Davidson introduced on June 12th in the House of Representatives. The bill includes a significant provision calling for the removal of Gary Gensler, the current Chair of the Securities and Exchange Commission (SEC). US Rep. Tom Emmer is the co-author of the bill.
“U.S. capital markets must be protected from a tyrannical Chairman, including the current one," -- Rep. Warren Davidson
According to Fox News, the bill would also redistribute power between the SEC Chair and the commissioners and add a sixth commissioner to the SEC. Further, the bill would also ensure balance by disallowing any single party from holding a majority on the commission and the creation of an executive director position.
While specific mention of cryptocurrency was not made in their statements, it is worth noting that Representatives Warren Davidson and Tom Emmer are recognized for their pro-crypto stance and have been vocal about their concerns regarding Gary Gensler's leadership at the Securities and Exchange Commission (SEC).
Their support for the "SEC Stabilization Act" suggests that their intentions may include addressing issues related to the regulation of cryptocurrencies and blockchain technology within the SEC.