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In every major litigation, there comes a moment when you realize it\u2019s time to settle. A ruling doesn\u2019t go your way, a juror gives your legal team the side eye, the judge makes it clear it\u2019s time for a settlement conference. After Judge Analisa Torres\u2019 decision in SEC v. Ripple, <\/em>the time has come for the United States Securities and Exchange Commission to settle the remainder of its case against Ripple Labs \u2014 as well as its case against Coinbase.<\/p>\n The SEC\u2019s attack on crypto has used a flexible legal definition of what constitutes a security that must register with the SEC under a legal test established by the Supreme Court in the 1946 case SEC v. Howey. Through most of its history, the SEC used this tool to go after outright frauds and scams with little economic reality behind them. You can understand why judges tended to give the SEC the benefit of the doubt and made the test increasingly flexible over a series of historical scam cases. Using this flexible test to attach legitimate crypto projects is different and, ultimately, leaves crypto projects with no way to register.<\/p>\n Torres ruled that sales to retail investors of the XRP (XRP) token were not necessarily linked to the entrepreneurial efforts of Ripple as a firm and, thus, failed one element of the Howey test. This is a unique crypto twist on the Howey test. Linking the investment to the entrepreneurial efforts of whoever is selling the interest is going to be harder in crypto because tokens don\u2019t represent an equity interest in the issuer. Thus, the purchaser of a crypto token is not as closely linked to the efforts of the founder of a new blockchain as equity investors in traditional firms.<\/p>\n Related: <\/em><\/strong>The Supreme Court could stop the SEC\u2019s war on crypto<\/em><\/strong><\/p>\n This turns the SEC\u2019s case against Coinbase on its head \u2014 and Coinbase knows it. It sent a strong message to the SEC when Coinbase relisted the XRP token within hours of Torres\u2019 decision. This victory was only a partial victory, but it makes it very difficult for the SEC to target secondary markets in crypto securities like secondary trading on Coinbase\u2019s platform. <\/p>\n All of this analysis doesn\u2019t even begin to explore the challenges the SEC will face with the Supreme Court eager to reign in administrative agencies with the evolving major questions doctrine that could dramatically curtail the SEC\u2019s war on crypto.<\/p>\n People are speculating what will happen if SEC appeals Ripple case to 2nd Circuit. Ya\u2019ll don\u2019t forget Ripple might still win the whole thing at SCOTUS. https:\/\/t.co\/MaWU940Ms1<\/p>\n\n