- At the recent MicroStrategy’s Bitcoin For Corporations event, Neel Maitra, a partner at Dechert and a seasoned former fintech and crypto specialist at the SEC, offered a deep dive into the judicial complexities currently entangling crypto regulations, with a special focus on the ongoing Ripple litigation.
- His insights are particularly noteworthy given his extensive background in both regulatory bodies and private legal practice, including his time at Sullivan & Cromwell.
- During the Legal & Regulatory Panel, Maitra discussed the divergent judicial opinions on how secondary trading of cryptocurrencies like XRP should be legally classified.
Neel Maitra, a former SEC crypto specialist, provides valuable insights into the ongoing Ripple litigation and the complexities of crypto regulations at the Bitcoin For Corporations event.
Will Ripple Vs. SEC ‘Inevitably’ Go To The Second Circuit?
During the Legal & Regulatory Panel, Maitra discussed the divergent judicial opinions on how secondary trading of cryptocurrencies like XRP should be legally classified. He emphasized that this disparity in judicial opinion, especially within the Southern District of New York, illustrates the uncertainty and complexity of current crypto regulations. “It’s funny because three of the judges relevant here were in the Southern District of New York. So in a single federal district the judges can’t agree on how these secondary trading of crypto should be treated,” Maitra observed.
Differing Judicial Opinions on Cryptocurrency Regulations
The primary issue at hand, as explained by Maitra, revolves around whether transactions conducted on cryptocurrency exchanges constitute securities transactions under US law. Judge Analisa Torres, overseeing the Ripple case, differentiated between primary and secondary transactions. In primary transactions, purchasers buy directly from Ripple and rely on Ripple’s efforts for potential profits, clearly categorizing such transactions as securities under the Howey Test.
However, Judge Torres argued that secondary transactions, which occur anonymously on exchanges, do not automatically qualify as securities transactions. She termed these as “blind transactions,” where the buyers are often unsophisticated investors unaware of whom they are buying from or the intricacies of the underlying business operations of Ripple.
In contrast, Judge Jed Rakoff and Judge Katherine Polk Failla in separate cases (Terra Luna and Coinbase, respectively) adopted a broader view. They posited that the aggressive marketing strategies employed by crypto companies could influence both primary and secondary market transactions, thereby potentially categorizing even secondary transactions as securities.
Conclusion
Maitra’s insights into the ongoing Ripple litigation and the complexities of crypto regulations highlight the evolving nature of cryptocurrency regulation. His remarks underscore the ongoing debate and the likely progression of the case through the higher judicial echelons. This ongoing litigation not only affects Ripple and other individual firms but also sets critical precedents that could shape the regulatory landscape for the entire cryptocurrency market in the United States.
