Ripple’s top legal comments on recently revealed Hinman’s speech

In a Twitter thread, chief legal officer at Ripple Stuart Alderoty sheds light on the SEC’s lawsuit against Ripple. He reveals previously undisclosed information regarding Bill Hinman’s influential speech. 

Alderoty states that, after five years and seven court orders, the public can finally access emails and drafts related to Hinman’s speech, which offer a behind-the-scenes glimpse into the controversy.

13/An investigation must be conducted to understand what or who influenced Hinman, why conflicts (or, at the very least, appearances of conflicts) were ignored, and why the SEC touted the speech knowing that it would create “greater confusion.”

— Stuart Alderoty (@s_alderoty) June 13, 2023

Speaking at the Yahoo Finance All Markets Summit in 2018, Hinman provided guidance on how the SEC would regulate digital assets, including bitcoin and ethereum. He said, in particular, that digital assets should not be considered a security and, therefore, be subject to the regulatory framework for securities. For instance, Hinman mentioned that a sufficiently decentralized token is no longer considered security.

According to Alderoty, Hinman completely dismissed criticisms of his speech. He raised worry that the lengthy number of characteristics might lead to misunderstandings about how securities should be classified. In addition, Alderoty suggested that Hinman could make more explicit connections between his made-up elements and the well-established Howey analysis, but this was disregarded.

Moreover, the Office of General Counsel (OGC) concluded that one of Hinman’s criteria, keeping ownership or interest in a digital asset, was inappropriate under the law. Nevertheless, Hinman discussed it in his presentation.

There were also concerns that Hinman should have answered the fundamental issue of whether or not a digital asset satisfies the legal criteria of security, instead opting to discuss the advantages of SEC regulation. This omission drew attention to a loophole in the rules that Hinman had chosen to overlook.

Alderoty stresses that Hinman did not think there should be any rules regarding ethereum (ETH) as security. Fearing it might restrict the agency’s flexibility to adopt a different stance on ETH in the future, the OGC raised qualms about specifically referencing ETH in the speech. However, the use of ETH continued throughout the presentation.

Alderoty demands that the SEC immediately remove Hinman’s remarks after these disclosures. Despite the expected uncertainty, he urges that an in-depth study be conducted to learn more about the influences and conflicts that led to the SEC’s support of the speech.