Gensler responds to Ripple decision, says he's disappointed over treatment of retail investors

Securities and Exchange Commission Chair Gary Gensler had a mixed reaction to a judge’s decision last week that gave both Ripple and the regulator the ability to proclaim a partial win in the ongoing case about whether or not XRP should be considered a security.

Specifically, Gensler said the agency was “pleased” that the decision protected institutional investors and pushed back against a fair notice argument, a defense lodged by Ripple. The judge’s decision on retail investors, though, was more of a sticking point. 

“While disappointed on what they said about retail investors, we’re still looking at it and assessing that opinion,” Gensler said on Monday at a National Press Club luncheon where he was discussing artificial intelligence.

The SEC accused Ripple in 2020 of illegally raising $1.3 billion through the sale of XRP. Judge Analisa Torres of the Southern District of New York ruled last week that XRP was not a security when sold on the secondary market, but would be a security when sold to institutional investors. 

Torres said that Ripple’s “blind bid” or “programmatic” sales, where the firm used algorithms to sell XRP on trading platforms, was not a securities offering. 

Buyers “could not have known if their payments of money went to Ripple,” and so most people who bought XRP on exchanges did not invest in Ripple, Torres said. Torres also noted that since 2017, programmatic sales made up less than 1% of the global XRP trading volume. 

More enforcement on the horizon

The agency has taken on a number of big crypto firms, including crypto exchanges Binance and Coinbase over the past few months. The SEC accused both of failing to register with the agency, while also alleging that Binance lied to customers. 

“So what’s next? We’re going to continue to try to bring firms that may not be into compliance into compliance without prejudging any one of them and trying to ensure that we protect the investing public,” Gensler said.