Chair Poised to Dodge Ripple Lawsuit

• Ahead of the US SEC Chair’s hearing before Congress, permutations points to potential evasion of Ripple lawsuit.
• The SEC’s favoritism as it concerns Prometheum is now largely pronounced.

As the United States Securities and Exchange Commission (SEC) Chair Gary Gensler prepares to appear before the House of Representatives Committee on Financial Services, analysts are predicting that he might try to avoid any discussion linked to the Ripple XRP lawsuit. 

The hearing, which is dubbed ‘Oversight of the Securities and Exchange Commission’ is scheduled to be held on September 27th, 2023. 

About two weeks ago, while testifying before the Senate Committee on Banking, Housing, and Urban Affairs, Gensler stated that the crypto industry is rife with fraud, abuse, and misconduct. To emphasize his broad conviction on this position, he also repeated the statement in his recent testimony which was submitted before the House Committee on Financial Services in preparation for the hearing. 

Gensler is unyielding and is still holding on to the U.S. SEC’s widely criticized stance on crypto regulation that asserts most digital assets are subject to extant securities laws. After Judge Analisa Torres ruled on July 13 that XRP is not security, the SEC decided that it would pursue a re-examination of the decision in an appellate court. 

Based on the granted approval from Judge Torres, the SEC filed a motion to appeal the July 13th verdict and to freeze the case during the appeal.

Apart from the Ripple XRP lawsuit, the SEC Chair chose to remain silent about Grayscale’s spot Bitcoin (BTC) Exchange Traded Fund (ETF) conversion ruling or any other pending ETF applications. 

Republicans in Congress have presented a memorandum to the Committee where they highlighted some of SEC’s past activities. Some of the areas touched in the memorandum are the definition of crypto trading platforms and companies running crypto custodial activities. It is therefore very likely that questions will spring from these areas, disrupting whatever shield Gensler might have put in place.

SEC Favouritism Questioned Beyond Ripple Lawsuit

In light of the current developments, Congressman Blaine Luetkemeyer approached Gensler and the Financial Industry Regulatory Authority (FINRA) on certain concerns bordering on both agencies’ scrutiny of registered broker-dealers with ties to the Chinese Communist Party like Prometheum and Webull. 

It is worth recalling that a few months ago, some inquiries were made into the SEC based on its “reckless and overly strict methodology” regarding digital assets.

Commenting on the relationship with the aforementioned startups, Congressman Ritchie Torres claimed that SEC’s decision to grant Prometheum a specialized broker-dealer license was a suspicious political move. The lawmaker, therefore, sought the opening of an investigation into the regulator’s failure to establish a robust yet practical registration process for legitimate digital assets platforms.

Prometheum’s license is raising concern amongst crypto leaders because the firm does not trade digital assets. While Prometheum has been questionably favored by the markets regulator, other digital asset service providers who need these licenses have not just been denied but their activities have been tagged a violation of securities laws. 

Binance, Kraken, and Coinbase are some of the exchanges that have been levied an enforcement action by the SEC over their trading activities.

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