The Hinman documents were finally unsealed and made publicly available on June 12 after a lengthy back and forth between Ripple and the United States
The Hinman documents were finally unsealed and made publicly available on June 12 after a lengthy back and forth between Ripple and the United States Securities and Exchange Commission (SEC), but what exactly do they reveal?
The documents are extensive, and while they can be found in public resources like the Public Access to Court Electronic Records (PACER) or CourtListener, lawyer James Filan tweeted on June 13, compiling them into two URLs.
#XRPCommunity #SECGov v. #Ripple #XRP Here are the Hinman documents, by Exhibit number, in one place. https://t.co/6kUYZ1X2WKhttps://t.co/wZQmalfFkS
— James K. Filan (@FilanLaw) June 13, 2023
Speaking to Cointelegraph soon after the unsealing, pro-XRP lawyer and founder of CryptoLaw John Deaton shared his belief that “the documents themselves don’t impact the judge’s underlying analysis of whether XRP (XRP) was offered/sold by Ripple as an investment contract, or XRP’s status in the secondary markets in the United States.“
This is considered a key defense of Ripple during its legal battle with the SEC. But those keeping a close eye on the case will know that the documents were not expected to do so, despite the then SEC chair Jay Clayton referencing the speech as “the approach we take to evaluate whether a digital asset is a security,” the 2018 speech carried disclaimers that it was the personal views of the then director of corporation finance William Hinman, which “does not necessarily reflect those of the Commission.”
With the Hinman documents being such a hot topic, many other crypto lawyers have also wondered what the documents might mean for XRP and Ether (ETH).
A “nothingburger?”
After the documents were unsealed, many onlookers, such as Gabriel Shapiro, general counsel for crypto firm Delphi Labs, took to Twitter calling them a “nothingburger,” which had no impact on the case between Ripple and the SEC.
Hinman emails are a nothingburger though great for ETH. No idea why Ripple thinks these emails help Ripple’s case….
— _gabrielShapir0 (@lex_node) June 13, 2023
Pro-XRP lawyer and Hodl Law founder Fred Rispoli had a different take when appearing on the Thinking Crypto podcast on June 15. He suggests they are “explosive” because although “we all knew there’s a revolving door” between regulators and private firms — and “behind the scenes dealings” — the public rarely gets a chance to see it as clearly as it’s displayed in the emails.
In other words, while the documents might not help Ripple regarding an XRP security determination, it does impact the SEC’s credibility. It sheds further light on why Hinman gave the speech despite protests from other SEC divisions.
The documents also highlight what appears to be an acknowledgment from Laura Jarsulic — an attorney with the SEC’s Office of General Counsel — that tokens on a sufficiently decentralized network might exist in a “regulatory gap” where the tokens are “not a security because there’s no ‘controlling’ group,” but “there may be a need for regulation to protect purchasers” as occurs with credit cards and medication.
This might be significant, as current SEC chair Gary Gensler has repeatedly said that he believes all cryptocurrencies except for Bitcoin (BTC) are securities and that rules for crypto already exist.
A boost to Ripple’s fair notice defense
Ripple’s fair notice defense refers to the argument that the SEC had not provided it with sufficient notice before suing it for committing securities fraud in December 2020.
However, the defense is generally not perceived to be strong, as longstanding court precedent — i.e., the Howey test that determines whether a transaction qualifies as an investment contract or security — is regarded as fair notice.
The FAIR NOTICE DEFENSE is not what a lot of people think it is. I see a lot of comments about how @Ripple’s FND is a slam dunk and Ripple and #XRP will win. Make no mistake about it, Ripple hopes the judge never decides the FND. #XRPHolders would prefer no decision on the FND.
— John E Deaton (@JohnEDeaton1) July 2, 2022
But in the interview with Cointelegraph, Deaton suggested that the documents support Ripple’s argument that the speech sowed market confusion and hindered the ability of market participants to determine exactly what constitutes a security under the Howey test, saying:
“The documents do assist Ripple (and others) in arguing that the speech caused greater confusion in the markets, causing market participants to lack adequate notice of what was prohibited by existing law.”
The SEC’s credibility
The Hinman documents show the conversations between various SEC members as they sought to get the speech ready for public release.
As pointed out by Ripple’s chief legal officer Stuart Alderoty in a Twitter thread on June 13, the emails also highlight that Hinman had received feedback from other divisions of the SEC,…
cointelegraph.com