SEC Could Settle with Ripple Labs to Avoid Hinman Documents Getting Public

The end of the protracted legal battle between the US Securities and Exchange Commission (SEC) and Ripple Labs is in sight. It’s starting to look more and more like Ripple Labs has a chance to settle the case with the US regulator in its favor.

The infamous Hinman documents

An important development in the lawsuit between the two parties is the judge’s decision to disclose the Hinman documents. This is a selection of documents that formed the basis for the speech by William Hinman, a former SEC executive, in which he qualified Bitcoin and Ethereum, among others, as digital commodities.

The rationale for this qualification is that both Bitcoin and Ethereum were sufficiently decentralized at the time. The Hinman documents also include the SEC’s internal deliberations over the decision to designate Bitcoin and Ethereum as digital commodities.

Ripple Labs has already had access to these documents and the SEC wants to do everything it can to prevent them from leaking out further. The reason for this is likely that this opens the way for several other cryptocurrencies to escape the powerful arm of the SEC.

The importance of qualifying as a digital commodity

The lawsuit between the SEC and Ripple Labs initially revolves around the question of whether the XRP token qualifies as a security for US law. We speak of an effect if a financial object carries a certain profit expectation. If that is the case, then a party may not just put this financial object on the market.

The reason for this is that there are all kinds of laws and regulations to protect consumers when issuing such financial objects. If Ripple Labs’ XRP token qualifies as a security for US law, this means that crypto exchanges must also remove the token from their platform.

Listing securities on an exchange requires special licenses, which parties such as Coinbase, Binance and Kraken do not have. The qualification as an asset can therefore have major consequences for Ripple Labs and the XRP token. However, the Hinman documents appear to contain information that makes it more than likely that the XRP token, like Bitcoin and Ethereum, qualifies as a digital commodity.

Will the SEC give up?

According to lawyer John Deaton, there is a good chance that the SEC will bet on a settlement with Ripple Labs. This means that they do not wait for the judge’s decision and come to an agreement together about the outcome of the case. If we are to believe the words of John Deaton, it is important that the contents of the Hinman documents do not leak out.

To avoid that, a settlement with Ripple Labs and thus losing the lawsuit is the only option for the powerful financial body. If Ripple Labs wins the lawsuit, it could be a major blow to the rest of the crypto industry. The opposite is also true: in the event of a loss, a large amount of tokens may immediately disappear from the major exchange platforms.