Ex-SEC Official Predicts XRP Lawsuit Dismissal On ‘Highly Favorable Terms’

The XRP lawsuit between the US Securities and Exchange Commission (SEC) and Ripple appears to be nearing a resolution, with former SEC official John Reed Stark suggesting that the case will be dropped under “highly favorable terms”. Stark, who formerly served as the Chief of the SEC’s Office of Internet Enforcement, made these claims in a February 18 post on X , citing broader shifts in the SEC’s approach to crypto enforcement.

XRP Lawsuit Faces A Major Shift

Stark’s post comes in the wake of significant developments regarding the SEC’s enforcement actions against major crypto entities. He noted that the SEC’s case against Coinbase has been “paused,” drawing parallels to a similar pause in its case against Binance.

According to Stark, this pattern suggests that the SEC is reassessing its regulatory stance on digital assets, which could result in a withdrawal of its appeal against Ripple. “The writing is now on the wall: SEC crypto-enforcement has officially expired,” Stark wrote in his post. He added: “I guess winning cases is not a measure of success under the new SEC regime. It is instead more worthy of a Scarlet Letter and disbandment.”

The SEC recently informed the Second Circuit that its newly formed Crypto Task Force could lead to a resolution in its enforcement case against Coinbase, warranting a delay in its response to Coinbase’s appellate review request. A joint motion filed by the SEC and Coinbase described the agency’s ongoing review of crypto-related issues and sought additional time for “appropriate review.”

With the SEC appearing to soften its stance on crypto-related litigation, Stark predicts a similar outcome for the XRP lawsuit. Ripple has been locked in a legal battle with the SEC since December 2020 over allegations that XRP constitutes an unregistered security. However, a pivotal ruling in July 2023 saw Judge Analisa Torres determine that XRP sales to retail investors did not qualify as securities transactions—dealing a significant blow to the SEC’s case.

Stark’s insights suggest that the SEC could either pause or completely withdraw its appeal against Ripple. “Expect all crypto-related appeals, including the appeal of the Ripple matter, to pause or even more likely, to be fully withdrawn,” he stated.

One of the most notable shifts in the SEC’s internal structure has been the reorganization of its crypto enforcement division. The once-prominent Crypto Assets and Cyber Unit has been rebranded as the Cyber and Emerging Technologies Unit. Stark emphasized that this move reflects a strategic pivot away from aggressive crypto-related enforcement, highlighting the reassignment of a key SEC trial lawyer who had previously led successful litigation efforts against major crypto firms.

“The SEC’s utter evisceration of its crypto-enforcement program is now firing on all cylinders,” Stark remarked, noting that even the most successful crypto enforcement attorneys within the agency are being reassigned to non-litigation roles.

Stark’s assessment suggests a broad de-escalation of SEC enforcement actions against the crypto industry. He outlined three key expectations: First, he expects that crypto investigations will be halted. Ongoing SEC investigations into crypto projects are likely to slow down or stop altogether.

Second, active lawsuits, including the XRP case, may be resolved in a manner highly favorable to crypto firms. “Expect the SEC to direct the SEC trial unit to pause all crypto-related litigation or, alternatively, to settle or dismiss all SEC crypto-related cases expeditiously in highly favorable terms to the crypto-defendants,” Stark writes.

Third, legal appeals, such as the Ripple case, may be abandoned as the SEC recalibrates its regulatory approach. “Expect all crypto-related appeals, including the appeal of the Ripple matter, to pause or even more likely, to be fully withdrawn,” he adds.

Despite previous judicial rulings affirming that certain digital assets qualify as securities, Stark asserts that the current regulatory climate renders these precedents “moot for now.” He concludes: “Regardless of how the SEC Acting Chair or the new SEC Chair labels or spins the Binance, Coinbase (and soon-to-be Ripple) ‘pausing,’ the SEC crypto-enforcement is as dead as Julius Caesar. RIP,” he concluded.

At press time, XRP traded at $2.60.