- Stark: Rakoff’s verdict may shift crypto law away from Ripple case.
- Rakoff’s ruling challenges ‘major questions doctrine’ in crypto law.
- Stark predicts Rakoff’s decision could reshape digital currency regulation.
John Reed Stark, president of John Reed Stark Consulting, has brought attention to a significant development in the digital currency industry. Stark, a former chief of the SEC’s Office of Internet Enforcement, pointed out a notable divergence from the precedent set in the SEC v. Ripple case. The highlight of Stark’s commentary was U.S. District Judge Jed Rakoff’s decision in the SEC lawsuit against Terraform Labs and its founder, Do Kwon.
Newsflash: Ripple Decision Already in (Big) Trouble
SDNY District Judge Jed Rakoff today allowed the SEC to go forward with its case against Terraform Labs and founder Do Kwon. In doing so, Judge Rakoff specifically rejected the distinction made in the Ripple case between public… pic.twitter.com/JZZ8vukfFt
— John Reed Stark (@JohnReedStark) July 31, 2023
In stark contrast to the Ripple verdict, Rakoff allowed the SEC’s case against Terraform Labs to proceed, explicitly challenging the previously drawn distinction between institutional and public sales of digital assets. Rakoff’s groundbreaking ruling came as a blow to the crypto defendants, including Terraform Labs, who’d been relying on the “major questions doctrine”.
The doctrine, often invoked as a defensive line by digital currency enterprises against SEC accusations, essentially safeguards industries from over-regulation. However, Rakoff deemed it inappropriate for the cryptocurrency industry, as he did not equate its economic and political significance with that of, say, the American energy or tobacco industries.
Stark underscores that Rakoff’s decision may signify the beginning of a broader shift in how courts interpret securities laws as they pertain to the burgeoning crypto industry. Known for his vast experience and profound knowledge of securities law, Rakoff is highly regarded within legal circles. His noteworthy rulings, especially in the realm of securities and criminal law, are influential and far-reaching.
This development may mark the dawn of a new era in digital currency regulation, providing an opportunity to recalibrate the existing frameworks while ensuring robust safeguards against potential misuse. It also signals a possible change in the fate of the Ripple decision, as Stark presages more judges challenging and potentially overturning it.