Former chairman of the U.S. Securities and Exchange Commission (SEC), Jay Clayton, appeared on CNBC, where he spoke on the agency’s current regulatory approach. And Ripple’s boss Brad Garlinghouse did not take his remarks very kindly.
Garlinghouse Recounts Clayton Dropping 11th-Hour Lawsuit Against Ripple
In a resurfaced interview from June 29, 2023, ex-SEC chair Jay Clayton posited that the securities regulator should initiate legal action against specific firms only when they have substantial legal grounds. He stressed that regulators should formulate clear guidelines and only lodge lawsuits they are certain will handle judicial scrutiny.
In response to the interview, Ripple’s Bradley Garlinghouse took to Twitter to call out Clayton for his hypocrisy while describing it as “shocking.” The Ripple CEO’s anger is not unwarranted as he, just like other crypto enthusiasts, is shocked that someone like Clayton could speak about abuse of power.
Garlinghouse recalls how a day before Clayton stepped down in late 2020, he filed a lawsuit alleging that his company Ripple Labs had violated securities laws for over seven years by selling XRP in unregistered securities transactions. Clayton took the bold step of naming Garlinghouse and Executive Chairman Chris Larsen as defendants in the $1.3 billion lawsuit.
Looking at how the suit has turned out so far, one could contend that Clayton abused his power as the SEC under Gary Gensler voluntarily dismissed charges against Ripple’s principal executives with prejudice. This was the company’s third recent win in its multi-year legal battle with the top Wall Street watchdog.
In July, U.S. District Court judge Analisa Torres ruled that XRP “is not necessarily a security on its face,” and that Ripple’s programmatic sales of XRP on crypto exchanges were not securities offerings, in a major victory for the blockchain payments firm. In early October, the SEC’s attempt to have its high-profile courtroom loss to Ripple overturned was rejected.
Of course, the legal battle — which is considered a defining legal showdown primed to dictate the fate of crypto regulation in the United States — isn’t exactly over, and verdicts helpful to Ripple can still be appealed following the April 2024 trial. Ripple and the SEC are expected to negotiate soon how much the company needs to pay in restitution for breaking the law via its $700-plus million sales to institutional investors.