Ripple won the right on Tuesday to peek into the Securities and Exchange Commission’s (SEC) internal communications on how it determines whether a cryptocurrency is a security.
The San Francisco-based cryptocurrency firm is hoping to find evidence the regulator defined XRP at some point as being similar to bitcoin and ether, two cryptocurrencies largely accepted as non-security instruments, according to a report by Law360.
The distinction is important as the SEC is alleging Ripple and two of its executives violated U.S. securities laws in selling XRP to retail consumers. The case may lead to a court ruling on how and when a cryptocurrency is considered a security that other startups in the U.S. could use as informal guidance in the future.
The eight years taken by the regulator to file suit against Ripple is also another angle being pushed by the cryptocurrency firm as it attempts to strengthen its argument in the five-month-old case.
Granted by U.S. Judge Sarah Netburn in the Southern District Court of New York, the motion affords Ripple access to the SEC’s minutes and memos “expressing the agency’s interpretation or views” on cryptocurrency, which Netburn said are likely discoverable. Netburn also said Ripple’s discovery was a “high-stakes” win, according to the report.
One of Ripple’s lawyers, Mathew Solomon, argued it could be “game over” for the entire case should Ripple catch the SEC as having privately stated XRP is more like a currency than a security because that would place XRP outside the regulator’s jurisdiction.
“I’m going to grant in large part the defendants’ motion,” said Netburn. As part of the ruling, staff-to-staff email communications will not have to be produced.
In December, the SEC sued Ripple, its CEO Brad Garlinghouse and Executive Chairman Chris Larsen alleging they violated federal securities laws in selling $1.38 billion worth of XRP to the general public. The defendants are arguing they haven’t done anything wrong.