Court grants Ripple access to SEC’s internal trading policies on XRP

A judge has granted Ripple’s request to force the U.S. Securities and Exchange Commission to reveal its non-public policies regarding whether agency employees may buy and sell XRP and other cryptocurrencies, according to a screenshot of a new legal filing shared by the lawyer representing XRP holders.

Fast facts:

• Earlier this month, Ripple sought the SEC’s “policies governing SEC employees’ trading in, or purchase or sale of, Digital Assets and/or Virtual Currencies, including all changes and updates to those policies.”

• The SEC and Ripple had been at an impasse over the agency’s internal documents, with the SEC arguing that they were irrelevant to the litigation and would “not lead to the discovery of any relevant evidence.” But Ripple contends that the policies could reveal the SEC’s stance on digital assets — including any distinctions it draws between XRP and other cryptocurrencies, such as Bitcoin and Ethereum’s Ether. Ripple lawyers are arguing that those facts are relevant to the company’s fair notice defense and applications of the Howey test as to whether Ripple and co-defendants CEO Brad Garlinghouse and executive chairman Chris Larsen offered and sold XRP as securities.

• In her ruling, U.S. Magistrate Judge Sarah Netburn — who is presiding over discovery in the SEC v. Ripple Labs lawsuit — noted that SEC has already begun to produce documents related to Ripple’s earlier request for internal agency communications about Bitcoin, Ether and XRP from the agency’s FinHub electronic mailbox as well as from its Office of Investor Education Advocacy.

• Last December, the SEC filed a lawsuit against Ripple alleging that its sale of XRP was an unregistered securities offering worth over US$1.38 billion. The SEC also named Ripple’s CEO Brad Garlinghouse and executive chairman Chris Larsen as co-defendants for allegedly aiding and abetting Ripple’s violations. The lawsuit is currently in its discovery phase, with the SEC and Ripple battling over the information to be shared with the other side. Fact discovery and expert discovery are to be completed by Aug. 31 and Oct. 15 respectively.

• Separately, XRP holders have asked the court to include them as third-party defendants in the lawsuit, arguing that the SEC is not adequately representing their interests. They are represented by attorney John Deaton, who shared a portion of the latest SEC v. Ripple court document in a tweet.