XRP News Today: Ripple Faces SEC Scrutiny, Forecasting More Legal Challenges

The Wednesday Overview

On Wednesday (May 8), XRP declined by 1.58%. Following a 2.83% slide on Tuesday (May 7), XRP ended the session at $0.5167.

SEC vs. Ripple: SEC Reply Brief Resonates

On Tuesday (May 7), the SEC filed a redacted version of the reply brief as the ongoing SEC vs. Ripple case reached its final stages.

The filing drew significant criticism from the crypto community. Nevertheless, several arguments from the SEC reply brief will likely draw investor concern. Arguments from the SEC regarding post-complaint XRP sales to institutional investors and Ripple’s plans to launch a stablecoin are particularly noteworthy.

The SEC stated that pre-complaint ODL institutional sales violated US securities laws. Significantly, the SEC argued that Ripple’s stablecoin would be an unregistered security and in breach of US securities laws (once launched).

Jeremy Hogan of Hogan and Hogan had this to say about the reply brief,

“The Ripple v. SEC briefs are FINISHED! And I think the SEC went out with a whimper here. It didn’t even try to attack ODL sales, just noting that Ripple was trying to re-litigate the issue (which it is). And it brought nothing new on damages. Just waiting for The Judge now!”

With the reply brief filed, the parties and any third parties must complete some procedural steps. The courts will then decide on the penalty Ripple must pay for breaching Section 5 of the 1933 US Securities Act. One area of interest will be whether the courts consider XRP sales to non-US institutional investors.

The SEC’s opening and reply briefs did not distinguish between US and non-US sales. In Morrison vs. NAB, the US Supreme Court ruled the SEC only has jurisdiction over US-based sales. In the opposition brief, Ripple argued that most ODL business is outside the US.

Nevertheless, Judge Sarah Netburn was clear on her stance vis-à-vis post-complaint compliance with US securities laws, stating,

“The SEC credibly argues that the District Judge may consider post-complaint conduct when determining whether an injunction is necessary and just.”

If the judge determines that Ripple breached US securities laws after the complaint, Ripple may face a punitive penalty. More significantly, the court could grant the SEC’s request for an injunction and prohibit Ripple from selling XRP to institutional investors in the US.

An injunction coupled with the SEC’s view about Ripple’s plans for a stablecoin could impact plans to grow its US business. There is also the likely SEC appeal against the Programmatic Sales of XRP ruling for investors to consider.

XRP Price Action

Daily Chart

XRP remained below the 50-day and 200-day EMAs, affirming the bearish price signals.

An XRP break above the 50-day EMA would support a move to the 200-day EMA and the $0.5739 resistance level. A breakout from the $0.5739 resistance level could give the bulls a run at the $0.60 handle.

SEC activity and SEC vs. Ripple case-related news need investor consideration.

Conversely, an XRP fall through the trend lines could signal a drop below the $0.50 level.

The 14-day RSI reading, 44.88, indicates an XRP fall through the $0.50 handle before entering oversold territory.

4-Hourly Chart

On the 4-hourly, XRP stayed below the 50-day and 200-day EMAs. The EMAs confirmed the bearish price trends.

An XRP move through the 50-day EMA could give the bulls a run at the $0.5361 resistance level. A break above the $0.5361 resistance level would support a move to the 200-day EMA.

However, an XRP break below the trend lines would bring sub-$0.50 levels into play.

The 14-day RSI reading, 42.40, suggests an XRP fall through the $0.50 handle before entering oversold territory.