Judge Says Ripple Can Access Emails About SEC Ethereum Speech

Ripple won a key procedural victory in its battle with the Securities and Exchange Commission on Thursday, as a federal judge ruled that the agency cannot claim that emails concerning a landmark June 2018 speech about Ethereum are privileged documents.

The speech in question was delivered by a former top SEC official, William Hinman, who told the audience at a Yahoo Finance crypto summit that Ethereum was not a security because it was sufficiently decentralized.

That speech has also become central to the court case in which the SEC argues that Ripple and its top executives knew the blockchain's digital currency, XRP, was a security that needed to be registered with the agency but sold it to the public anyway.

As part of its legal strategy, Ripple has sought to obtain evidence about how Hinman decided Ethereum was not a security—evidence that could help the company rebuff the SEC's claims about the nature of XRP.

Thursday concerns a larger batch of documents, including notes by the SEC's crypto expert, Valerie Szczepanik, about a variety of SEC deliberations, as well as emails in which Hinman and others discussed a draft of the Ethereum speech.

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The SEC had argued that the documents were subject to what is known as "privilege"—a legal term that means a party does not have to share them with its opponent in litigation. The SEC invoked attorney-client privilege as well as other forms of privilege designed to shield government agencies in certain situations.

U.S. Magistrate Judge Sarah Netburn agreed with the SEC when it came to certain documents, but rejected the agency's argument for more than a dozen batches of other documents. In the case of the emails about Hinman's speech, Netburn concluded that the privilege did not apply because the speech concerned his personal views, not those of the agency.

SEC Chair Gensler Sidesteps Question About Ethereum's Status as a 'Security'

SEC chair Gary Gensler today didn't give an answer on whether or not Ethereum is a security—but he did say that if someone or something is raising money from the public, it could potentially meet the definition.  "We don't get involved in these types of public forums talking about any one project, one possible circumstance or give legal advice over the airwaves that way," he said on CNBC when asked whether Ethereum, the second biggest cryptocurrency by market cap, was a security.  He then added...

Here is the key part of the decision:

"Although Hinman and the SEC admit that agency staff discussed his speech, it appears that this speech was 'merely peripheral to actual policy formation,' Tigue, 312 F.3d at 80, and not an 'essential link' in the SEC’s deliberative process with respect to Ether, Grand Cent. P’ship, 166 F.3d at 482. Accordingly, emails concerning the speech or draft versions are neither predecisional nor deliberative agency documents entitled to protection."

Netburn's decision will provide Ripple with new ammunition to use both in its legal pushback, and in the court of public opinion, where many—especially in the crypto industry—believe the SEC has been unduly harsh on the company.

Nonetheless, the ruling is only a procedural one and does not have a bearing on the bigger issue in the case, which revolves around whether or not XRP is a security.