Were Ripple’s long-awaited Hinman emails a smoking gun or a ‘nothingburger’?

The crypto industry is hungry for a victory against the Securities and Exchange Commission, with many pinning their hopes on the legacy crypto firm Ripple. Founded in 2012, Ripple has long promised that it could fix global payment networks through its cryptocurrency, XRP, although it has become more well known for its string of enforcement settlements and lawsuits, as well as an online army of either impassioned or vicious supporters, depending on whom you ask.

In 2020, the SEC charged Ripple and two of its executives with raising over $1.3 billion through an unregistered digital asset securities offering for XRP. While many crypto projects now point to decentralization as the reason why their tokens are not securities, Ripple has staked out a different approach, instead leaning on a so-called fair notice defense that argues it lacked sufficient information from the SEC to avoid violating the law.

Barring a still-hazy use case, much of Ripple’s business model rests on maintaining the price of XRP, and its executives and legion of acolytes have promoted its case against the SEC as existential for the larger industry. Its lawyers touted one key piece of evidence—emails surrounding a 2018 speech given by an SEC director asserting that Ether was not a security because it had become sufficiently decentralized—as a smoking gun that would dismantle the SEC’s prosecution.

After much legal back-and-forth, Ripple finally convinced a judge that it should be able to release the emails, which detailed agency deliberation over the speech. Finally published yesterday, eager onlookers pored over the documents, with many leaving disappointed at yet another example of a divided agency, but no real bombshell revelations. Gabriel Shapiro, general counsel for crypto firm Delphi Labs, described them on Twitter as a “nothingburger” for Ripple’s case.  

Daniel Davis, a partner at Katten focused on financial markets and regulation, told me the emails will likely aid in Ripple’s fair notice defense, as they detail divided attitudes within the SEC over its crypto approach, as well as an admitted “regulatory gap” in the space. Davis added that details over secondary trading of digital assets could help Ripple’s defense that XRP itself is not a security, even if a judge finds that its initial sale of tokens was an unregistered securities offering. As Davis pointed out, the oranges in the famous Howey test were not an investment contract, but instead the purchase of the orange groves.

Others argued that the emails will aid the crypto industry more broadly than Ripple. One prominent lawyer working in the crypto venture space, who spoke on the condition of anonymity, said that Ripple has been trying to undermine decentralization as a key determinant in the Howey test. Yet again, others argued the emails reveal the SEC had largely adopted the decentralization approach internally—something that benefits the industry and projects like Ethereum, which have moved toward decentralization, but not Ripple.

The bigger issue, in the lawyer’s mind, has been Ripple’s effort to conflate its case with the rest of the industry. The lawyer noted that Ripple does not really reflect other crypto firms’ plight against the SEC, because of Ripple’s unabashed centralization, but that many onlookers fear speaking out because of the vitriolic response they receive from the XRP Army on social media.

“It’s upsetting because bullying in a lot of senses has worked by basically silencing people,” the lawyer said. “The industry generally thinks that the case is more important than it is because Ripple has kind of obfuscated what the actual things that are going on in the case are.”

Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz

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