Ripple CEO slams former SEC chair over regulatory approach critique

• Ripple CEO, Garlinghouse criticized SEC’s former chair Jay Clayton for his latest remarks.
• The former chair urged the SEC to target specific companies on strong legal grounds. 

Brad Garlinghouse, the CEO of Ripple [XRP], strongly criticized the former Chair of the United States Securities and Exchange Commission (SEC), Jay Clayton, for his remarks on the regulatory approach of the agency. These comments come against the backdrop of the SEC’s increasing regulatory actions against various cryptocurrency exchanges and companies since the first quarter of 2023.

During an interview with CNBC on 29 June 2023, Jay Clayton expressed his view that the SEC should only pursue legal action against specific companies. This is especially when they have strong legal grounds.

He emphasized the need for regulatory agencies to introduce regulations and legal cases that can successfully withstand judicial scrutiny.

Watching this clip makes my blood boil.

The hypocrisy is shocking. @CNBC @SquawkCNBC should be calling him out for the bullshit.

(As a reminder, jay clayton brought the case against ripple, me and Chris Larsen. And left the building the next day).

— Brad Garlinghouse (@bgarlinghouse) October 28, 2023

Garlinghouse critical of remarks amid lawsuit dismissal

Garlinghouse wasted no time in responding to Clayton’s remarks. Particularly in light of the SEC’s recent decision to dismiss allegations against Ripple without prejudice. He pointed out that the former SEC chair had initiated a lawsuit that had little chance of success in court.

This lawsuit, filed in December 2020, accused Ripple, Garlinghouse, and Ripple co-founder Christian Larsen of conducting an “unregistered, ongoing digital asset securities offering.” It also alleged that they had raised over $1.3 billion from sales of the XRP token.

Garlinghouse stated, “As a reminder, Jay Clayton brought the case against Ripple, me, and Chris Larsen. And left the building the next day.” This bold statement highlighted the questionable nature of the case initiated under Clayton’s leadership.

As reported earlier, the SEC moved to dismiss the charges against Garlinghouse and Larsen in October. This decision by the SEC followed a ruling by Judge Analisa Torres in July, which partially favored Ripple. The judge declared that retail sales of the XRP token did not meet the legal definition of a security.

Increased regulatory clarity ahead for crypto in the United States?

The dismissal of the SEC lawsuit against Ripple can provide some much-needed clarity and precedent regarding the regulatory status of certain cryptocurrencies. While Ripple’s XRP token was found to have violated securities laws in terms of sales to institutional investors, the ruling clarified that XRP sales to retail investors did not constitute a securities offering.

This can help to establish a clearer regulatory framework for various digital assets. The outcome also suggested that the SEC should provide more concrete guidance on how it views specific digital assets to avoid regulatory ambiguity.

This is not the only time the SEC has drawn criticism. Coinbase also criticized the SEC for its vague response to Coinbase’s rulemaking petition. Coinbase had been pressing the SEC for a clear answer regarding its request for regulations in the cryptocurrency market, particularly defining which digital assets should be classified as securities.

The U.S. has struggled to provide clear and comprehensive regulatory guidance for cryptocurrencies and blockchain technology. High-profile lawsuits, like the SEC’s case against Ripple, have drawn attention and pushed for the need for regulatory clarity.