SEC Under Fire for Repeated Legal Losses: Here’s Why Their Approach Is Concerning

The U.S. Securities and Exchange Commission (SEC) is going through a tough time due to a series of legal setbacks, raising questions about its stance on cryptocurrencies. It all started in July 2023 when a court’s decision regarding XRP left the SEC in a difficult position. Shortly after, the Grayscale victory added to the agency’s problems.

Here are the details.

Grayscale Victory Raises Eyebrows

A judge criticized the SEC, calling its rejection of Grayscale’s proposal “arbitrary and capricious.” This has raised questions about how the SEC deals with cryptocurrencies.

SEC Left With a 30-day Opportunity

The U.S. Court of Appeals for the Fifth Circuit sided with various business groups, including the U.S. Chamber of Commerce, who had filed a lawsuit against the SEC. They argued that the SEC had ignored valuable input during a notice-and-comment period. Additionally, they claimed that the SEC had not provided enough evidence to support its claims that the proposed rule would benefit the public.

On October 31, 2023, the U.S. Court of Appeals stated that the SEC’s actions were “arbitrary and capricious” because it didn’t consider the comments from the petitioners and skipped a proper cost-benefit analysis. As a result, the court has given the SEC 30 days to prove the validity of its decisions.

Also Read: SEC Under Fire for Lawbreaking With SAB 121: John Deaton Lashes Out

Triple Setback – Time to Re-evaluate?

This latest setback compounds the SEC’s problems following its losses in the XRP lawsuit and the Grayscale case. These events have raised questions about the SEC’s approach to the cryptocurrency space.

Stuart Alderoty, the Chief Legal Officer of Ripple, didn’t hold back when it came to sharing his thoughts on the SEC’s recent legal woes under the leadership of Chair Gary Gensler. He didn’t mince words in characterizing the situation as a “very troubling pattern” where the SEC seems to be drifting away from the principles of the law.

Back on October 25, 2023, Judge Analisa Torres officially issued an order regarding the US SEC’s decision to drop charges against Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen in the Ripple vs. U.S. SEC lawsuit.

Judge Torres has called for a joint scheduling brief from both parties, marking a significant development following the split verdict on July 13, 2023, which favored Ripple in the case regarding the retail sale of XRP tokens.