The dust has settled from last week's SEC v. Ripple decision and a few things have become clear. First, even though the SEC prevailed on some issues, the overall ruling was an enormous victory for Ripple as the price of XRP tokens—which the company holds gobs of—has gone bonkers. Second, the decision is a win for the broader crypto industry as other major tokens are still up by double digits. Some of this irrational exuberance is from "to the moon" imbeciles, but not all of it—many serious investors have taken a careful look at the judge's decision and like what they see.
The big question now is: What's the SEC's next move? Lawyers are divided on whether the agency will appeal the judge's decision and try to stuff the "XRP is not a security" conclusion back in the bottle, or instead slink away and try defeat the crypto industry on a different legal front. There's a case to be made for both approaches.
Preston Byrne of Rudnick Byrne said by Twitter message that the SEC is "in too deep" and has no choice but to fight on even though a settlement could be its best option. He has a point. SEC Chair Gensler, a one-time blockchain enthusiast at MIT, has reinvented himself as the scourge of the crypto industry in a bid to find favor with the powerful progressive Sen. Elizabeth Warren (D-Mass.).
For the sake of his career, Gensler may double down and pursue an appeal. He has legal cover to do so. Even though the judge in the case is an Obama appointee—making it hard for Gensler to blame his loss on a right-wing judiciary—her reasoning in the Ripple case has raised eyebrows. Some lawyers claim the ruling, which found XRP is a security when sold to sophisticated investors but not when it's sold on an exchange, provides extra protection to rich people but not retail investors. There's also the question of how far the ruling goes. Is it open season to peddle shitcoins so long as you do it on an exchange?
While all of this could be fodder for an appeal, there are good reasons for Gensler not to go through with it. One is that the SEC could suffer an even worse loss, especially if it goes to the hyper-conservative Supreme Court, which is apt to view Gensler as the poster child for what they see as widespread overreach by administrative agencies. Then there is the cost of fighting Ripple, which is stacked with gold-plated lawyers and is willing to fight till the end. The SEC doesn't have unlimited resources and even Gensler may conclude it makes sense to reach a settlement where Ripple pays a fine and the agency gets to declare a pyrrhic victory.
The case for settling is even stronger given that Ripple has an ace up its sleeve: time. As Fred Rispoli of Hodl Law noted, a portion of the judge's ruling is going to trial, which makes the appeals process much harder since higher courts hate to rule on issues piecemeal, and prefer to wait until there is a final judgment. When we chatted by phone, he said the chances of an SEC appeal are 50-50, but that if the agency does go down that road, Ripple will be able to drag the initial appeal out until the next presidential election or beyond—after which Gensler is unlikely to be around.
The bottom line is that the possibility of an appeal in SEC v. Ripple is a coin toss for now.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
