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Ripple Labs and the U.S. Securities and Exchange Commission (SEC) seem to be on the same page about the documents known as the Hinman Emails: The former official’s past remarks shouldn’t govern current policy.
Despite the rush of attention this week on the insider deliberations that went into writing a five-year-old speech from William Hinman - the former head of the SEC’s corporation finance division - the agency’s past uncertainty over the status of ether (ETH) never amounted to formal commission-approved rules or guidance. So the dialogue over the ex-official’s one-time remarks may offer some insights, but it's unlikely to move the needle on the agency's crypto policy.
“Nothing in these documents creates precedent or establishes law,” said Andrew Hinkes, a lawyer at K&L Gates who co-chairs its digital assets practice. At best, the emails give “a helpful snapshot of certain SEC staffers' views on some issues at a point in time,” so it’s useful for those trying to understand where the agency has been coming from on the crypto-as-securities debate, but there’s nothing the SEC can be held to, Hinkes said.
Hinman, in his speech that’s still posted on the SEC website, had said he didn’t “see a need to regulate ether” – a view that was debated among officials inside the agency even as he said it. The remarks have been a particular focus of Ripple, in light of the parallels between ETH and the XRP token closely associated with Ripple’s business.
“The SEC fostered regulatory confusion in the marketplace,” Ripple Chief Legal Officer Stuart Alderoty said Thursday in an interview on CoinDesk TV. “They knew the marketplace was confused, then they took steps to deliberately aggravate that confusion.”
Alderoty had also tweeted what he thinks the emails should mean: “Hinman’s speech should never again be invoked in any serious discussion about whether a token is or is not a security.”
As it happens, that seems fine with the SEC. The agency hasn’t relied on Hinman’s position in recent years and has moved on with other remarks from SEC Chair Gary Gensler that suggest a different view. After Ethereum’s high-profile move to proof-of-stake, Gensler said that such tokens may actually be securities, though he didn’t specify ETH.
Agency spokespeople declined to comment on the release of the emails this week, and Hinman didn’t respond to a request for comment.
Still, none of the issues debated around Hinman’s speech have legal bearing until the SEC’s five commissioners make a new rule, issue guidance or bring an enforcement action that explicitly makes the case that ETH is a security. That’s the chief point of interest for Ripple, which has been fighting with the regulator in court over whether the XRP token associated with its products is a security.
After the company also waged this fierce campaign to win access to the SEC’s emails, Ripple’s Alderoty would like to see them remain in the limelight, arguing that an investigation should be conducted into why Hinman said what he did. He said the SEC has relied on those remarks in its ongoing battles with the sector.
“They've weaponized it to bring a series of enforcement actions and trying – through regulation-by-enforcement, we now know – to really destroy and disrupt this crypto economy in the United States,” Alderoty told CoinDesk TV.
But others aren’t sure there’s anything in the messages to alter the high-stakes debate over how crypto will be regulated in the U.S.
“Those who expected bombshells were probably disappointed, but for those who work to understand these markets, there are helpful inclusions that merit further consideration,” Hinkes said.
“I don’t believe that the Hinman emails are particularly significant from a legal standpoint,” said Grant Gulovsen, an Illinois-based lawyer who works with crypto clients, in an email. “I don’t see how it helps Ripple/XRP. And if the Hinman speech is no longer (or never was) the view of the SEC, then it’s not good for crypto generally.”
Hinman – who noted during the 2018 speech that it was his personal view – took a position that crypto projects could become “sufficiently decentralized” that buyers wouldn’t expect anybody was at the helm, so they couldn’t be investment contracts regulated by the SEC. Gulovsen said that idea is still useful as "a reasonable application" of securities law for digital assets.