In a big tactical win for Ripple, a judge overseeing discovery in the U.S. Securities and Exchange Commission’s lawsuit against Ripple Labs has granted Ripple’s request to call William Hinman, the former head of the SEC’s Division of Corporation Finance, to testify about Ethereum and XRP.

U.S. Magistrate Judge Sarah Netburn on Thursday ruled to authorize Hinman’s deposition to proceed, with a delay of one week beyond an earlier scheduled date of July 19, to allow the SEC and Ripple to come to an agreement on the scope of the deposition.

The SEC, which filed a lawsuit against Ripple in December 2020, is alleging that the San Francisco payments company’s sale of XRP was an unregistered securities offering worth over US$1.38 billion. The SEC earlier had sought to prevent Hinman from testifying but has now lost its argument that Hinman’s knowledge and previous public statements are irrelevant to the litigation. The SEC also failed to persuade the judge that allowing Ripple to call Hinman to testify in court would deter qualified candidates from public service in the future. 

Netburn’s ruling indicates that she shares Ripple’s belief that Hinman’s testimony could provide important insights into the SEC’s stance on cryptocurrency, including XRP. At the heart of Ripple’s defense is its argument that it did not receive “fair notice” that the SEC would treat XRP differently from Bitcoin and Ethereum — two cryptocurrencies that Hinman, in a 2018 speech, declared were not securities.

The SEC told Netburn Thursday that Hinman’s views expressed in his 2018 speech were made in his personal capacity, but the agency also acknowledged that its own staff had helped draft Hinman’s speech.

The agency does not speak through its staff or individual commissioners but through formal “no-action letters” or enforcement actions, and anything Hinman said should be privileged as “deliberative,” SEC lawyer added. Deliberative-process privilege generally exempt federal agencies from having to reveal in court communications that formed part of the agency’s decision-making process.

Hinman, who served as director of the SEC’s Division of Corporation Finance from May 2017 to Dec 2020, has raised eyebrows and potential conflict-of-interest concerns after it was revealed that he had received a US$1.6 million pension from his former employer Simpson Thacher — a member of the Enterprise Ethereum Alliance — where he was a law partner. After he made his 2018 speech as an SEC director declaring that Ethereum was not a security, Hinman left the SEC last year and rejoined Simpson Thacher as a partner.

Calling Hinman’s 2018 speech as “the central question” of the hearing, Netburn said that the federal government’s lawsuit against Ripple was not a “run of the mill enforcement case by the SEC” and noted the substantial public interest in the proceedings. 

Thursday’s hearing, held by telephone conference, drew much interest from the XRP community in the United States and other parts of the world who listened in using the U.S. and international phone numbers provided by the court. 

Attorney John Deaton, who previously had filed a motion on behalf of 17,100 XRP holders seeking to intervene in the SEC v. Ripple Labs lawsuit as third-party defendants, said in a tweet: “The fight over the Hinman deposition has now just begun. It will be a heated ‘meet and confer’ meeting I can promise you that.”