In 2018, a U.S. Securities and Exchange Commission (SEC) official wanted to say that the agency did “not … see a need to regulate Ether,” according to an email released Tuesday. The emails, published by Ripple in its defense against an SEC lawsuit, show SEC officials deliberating about how clear the speech was in expressing a view that Ether (ETH) was not a security.
As written, the language remains vague as to whether ETH is a security. If you want to make an affirmative statement that it is not a security, the language could be stronger (i.e., just say it), wrote former SEC Director of Trading and Markets Brett Redfearn.
Valerie Szczepanik, the current head of the SEC’s FinHub group, wrote in an earlier email that she believed the less detail the better. Laura Jarsulic, an attorney with the SEC’s Office of General Counsel, referenced the landmark Supreme Court case SEC v. W. J. Howey Co. in her suggestion, saying that the Court found that only the purchase of land and a service contract was the purchase of a security.
The emails also indicated that SEC officials met with Ethereum founder Vitalik Buterin, apparently to discuss the Ethereum Foundation’s role. Ripple Chief Legal Officer Stu Alderoty tweeted that “We now can all see Hinman ignored multiple warnings that his speech contained made-up analysis with no basis in law, was divorced from the Howey factors, exposed regulatory gaps, and would create not just confusion, but ‘greater confusion’ in the market.”
The SEC declined to comment on the matter.
Tuesday’s release of emails tied to the one-time Director of Corporation Finance William Hinman’s 2018 speech about Ether sparked a surge in XRP’s price. The emails show SEC officials debating whether the speech was clear enough in expressing that Ether was not a security.
The emails suggest tying the speech closer to the Howey Test, which is still used today to determine whether something is a security. They also indicate that SEC officials met with Ethereum founder Vitalik Buterin to discuss the Ethereum Foundation’s role.
Ripple Chief Legal Officer Stu Alderoty tweeted that “We now can all see Hinman ignored multiple warnings that his speech contained made-up analysis with no basis in law, was divorced from the Howey factors, exposed regulatory gaps, and would create not just confusion, but ‘greater confusion’ in the market.” The SEC declined to comment on the matter.