Tomorrow, Tuesday 31 August 2021, could be a decisive day in the SEC’s case against Ripple.
In fact, a court hearing has been scheduled tomorrow with both sides to discuss the so-called “privilege dispute” that has been dragging on for months now.
Ripple vs SEC: What is the situation?
The issue concerns certain documents in the SEC‘s possession that were not handed over to the other side, in spite of an explicit request, due to the hypothetical existence of certain “privileges” (DPP, deliberative process privilege) that the SEC would have with respect to the deliberative process.
In other words, the SEC will have to try to get the court to recognise these privileges tomorrow, otherwise, it will be forced to hand over the entire documentation to Ripple.
If the SEC loses, the case could be severely affected, as the SEC clearly wants to hide something from the other side.
The “privilege dispute” has been going on since the beginning of June, when Ripple filed a motion to compel the SEC to hand over its internal documents relating to its investigation into the question of whether XRP is a security, and not a payment token.
These documents relate in particular to the results of the Howey test on ETH, which show that it is not a security, and which were also considered relevant by the judge in the case against Ripple.
Judge Netburn has also asked the government agency to hand over this documentation, but the SEC has so far categorically refused. One important thing to keep in mind is that it seems that the judge could even theoretically dismiss the case at this point, should the SEC continue to be uncooperative, though this is considered unlikely.
Ripple and the SEC: a possible settlement
One of the scenarios that is considered likely is that of a settlement between the two parties.
For example, the lawsuit between the New York State Attorney General’s Office and Tether and Bitfinex ended in a settlement, and it is not unlikely that the outcome will be similar.
Should the SEC fail to get the judge to uphold its right not to provide such documentation, the settlement scenario becomes much more likely, as it would allow the agency not to provide documentation without coming off as a loser in this case.
It is worth noting that XRP was born before ETH, in 2012, so having documentation available that would show that ETH was not to be considered a security when it was born in 2015, would help Ripple to defend itself from the accusation of having issued a security without the necessary authorizations.
However, it is worth remembering that ETH and XRP were initially two very different things, not least because XRP (which at the time was still called Ripple) was not decentralized at all.
The issue would still be completely open, but it could still evolve very quickly towards an agreement between the parties if the judge were to rule against the SEC tomorrow.
If no agreement is reached, two more hearings are already scheduled for the coming weeks, with the two CEOs, namely the current one, Brad Garlinghouse, and the one from 2012, Chris Larsen.
According to some insiders, if the judge rules in favour of the SEC tomorrow, the case could drag on into 2022.