Global fintech and funding innovation ecosystem

Decoding Judge Rakoff’s Opinion: What It Means for Future Crypto Regulations

Crypto Regulation | Aug 8

Unsplash Conny Schneider judge - Decoding Judge Rakoff's Opinion: What It Means for Future Crypto Regulations

Image: Unsplash/Conny Schneider

"Crypto got Rakoff’d" delves into the legal intricacies of the SEC's Ripple case, highlighting the contrasting protections for institutional and retail investors in the crypto landscape.

Current Ripple Case Rationale

  • A US district judge's hearing on the SEC's Ripple case led to a surge of joy in the crypto community. The judge's rationale was that institutional buyers expected Ripple to use the capital from its sales to enhance the XRP ecosystem and increase the XRP price.
  • In contrast, programmatic buyers (retail buyers and sellers) couldn't have the same expectations. The court held that while big institutional investors get SEC protection, retail traders don't because they aren't privy to the inner workings of the crypto world.
  • Ripple Judge Quote: "Whereas the Institutional Buyers reasonably expected that Ripple would use the capital it received from its sales to improve the XRP ecosystem and thereby increase the price of XRP . . . Programmatic Buyers [i.e., retail buyers and sellers] could not reasonably expect the same."

Enter Highly Respected Judge Rakoff's Opinion

  • Judge Rakoff rejected many of the usual defenses presented in crypto cases. He particularly took issue with the distinction made between institutional and retail buyers in the Ripple case. He argued that the Howey test, which determines what constitutes a security, doesn't differentiate between types of purchasers. Whether a coin was bought directly from the defendants or in a secondary resale transaction doesn't impact the perception of promises of profits based on the defendant's efforts.

Watch: Brookings: The Future of Crypto Regulation (On Demand and Transcript)

  • The implication of Judge Rakoff's opinion is that the distinction made between institutional and retail buyers in the Ripple case is not valid. He challenges the idea that securities law should treat institutional and retail investors differently based on their understanding or knowledge of the crypto industry. By rejecting many of the usual defenses presented in crypto cases and emphasizing that the Howey test doesn't differentiate between types of purchasers, Judge Rakoff's stance suggests that all investors, regardless of their size or sophistication, should be afforded the same protections under securities law.

Conclusion

Judge Rakoff's perspective on the Ripple case underscores the importance of equitable treatment for all investors within the realm of securities law. By challenging established distinctions between institutional and retail investors, he emphasizes the need for consistent legal interpretations and protections in the rapidly evolving crypto industry. This stance not only sets a precedent for future crypto-related cases but also calls for a more inclusive and fair approach to investor rights and protections.


NCFA Jan 2018 resize - Decoding Judge Rakoff's Opinion: What It Means for Future Crypto RegulationsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - Decoding Judge Rakoff's Opinion: What It Means for Future Crypto RegulationsFF Logo 400 v3 - Decoding Judge Rakoff's Opinion: What It Means for Future Crypto Regulationscommunity social impact - Decoding Judge Rakoff's Opinion: What It Means for Future Crypto Regulations

Support NCFA by Following us on Twitter!







NCFA Sign up for our newsletter - Decoding Judge Rakoff's Opinion: What It Means for Future Crypto Regulations




 

Leave a Reply

Your email address will not be published. Required fields are marked *

three + 10 =