Hinman documents in Ripple case raise questions about SEC’s motives

The newly released Hinman documents relevant to the ongoing legal battle between Ripple and the United States Securities and Exchange Commission have shed light on internal divisions within the SEC and raised questions about its motives.

The Hinman documents pertain to internal SEC communications regarding a speech delivered by former director William Hinman in 2018. During the speech, Hinman said that Ether (ETH), one of the largest cryptocurrencies, should not be categorized as a security. 

In an interview with Cointelegraph, crypto lawyer and founder of Hodl Law, Fred Rispoli, shared his thoughts on the recently released documents. According to Rispoli, the Hinman documents paint a picture of an agency more interested in expanding its jurisdiction than fulfilling its primary mission of protecting U.S. investors:

“These documents are substantively bad for the SEC but the optics are even more damaging. Taken together, they demonstrate an SEC that is clearly more concerned with expanding its turf rather than its near-ninety-year mission of protecting US investors. They show the revolving-door aspect of agency bureaucracy at its worst.”

He explained further: “For example, one of the unredacted documents showcase that the SEC’s Office of General Counsel recognized that crypto likely falls into “an ‘other’ category—it’s not a security because there’s no controlling group (at least in the Howey sense), yet, like many other things (medication, credit cards) there may be a need for regulation to protect purchasers.” 

The “Howey Test” is a legal framework established by the U.S. Supreme Court in SEC v. Howey in 1946 to determine if a transaction qualifies as an investment contract and therefore falls under the definition of a security. 

According to Rispoli, the core issue is that while cryptocurrencies may possess certain security attributes, their fundamental characteristics set them apart from traditional securities. Consequently, regulation is necessary but should not be entrusted solely to “power-hungry” securities regulators. He explained:

“Crypto may have some security attributes but its other attributes make it fundamentally different than securities. Hence, there is a need for regulation but clearly not from the power-hungry SEC. The SEC also recognizes this and is scrambling to protect and expand its jurisdiction even in the absence of Congressional authorization.”

The release of the Hinman documents has opened up a Pandora’s…