The United States Court of Appeals for the Fifth Circuit has found that the U.S. Securities and Exchange Commission (SEC) acted “arbitrarily and capriciously” in a case involving the stock buyback disclosure rule. “Another day and another court finds that the SEC again acted arbitrarily and capriciously. Is anyone else concerned about this very troubling pattern of the SEC flouting any faithful allegiance to law under Mr. Gensler?” Ripple’s chief legal officer asked.
SEC Loses Another Legal Battle
Following a federal court’s determination that the U.S. Securities and Exchange Commission (SEC) had acted “arbitrarily and capriciously” in a case involving a spot bitcoin exchange-traded fund (ETF) application, another federal court reached a similar conclusion in a separate matter involving the securities regulator.
The United States Court of Appeals for the Fifth Circuit stated on Tuesday that the SEC’s stock buyback disclosure rule was arbitrary and capricious. While this case is unrelated to crypto, the crypto community noted that the securities watchdog had lost another legal battle.
Crypto exchange Coinbase’s Chief Legal Officer Paul Grewal highlighted on social media platform X Wednesday that the United States Court of Appeals for the District of Columbia Circuit recently ruled in favor of Grayscale Investments, and now the Fifth Circuit has reached a similar decision. He stressed:
Again and again, federal courts of appeal hold that the SEC acted arbitrarily and capriciously in violation of the Administrative Procedure Act.
Grayscale Investments is seeking to convert its flagship bitcoin trust (GBTC) into a spot bitcoin ETF. Initially, the SEC rejected the cryptocurrency asset manager’s application. However, the Court of Appeals for the District of Columbia Circuit sided with Grayscale and instructed the SEC to reconsider the application. Circuit Judge Neomi Rao explained: “The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products. We therefore grant Grayscale’s petition and vacate the order.”
Ripple Chief Legal Officer Stuart Alderoty also commented on X Wednesday: “Another day and another court finds that the SEC again acted arbitrarily and capriciously. Is anyone else concerned about this very troubling pattern of the SEC flouting any faithful allegiance to law under Mr. Gensler?”
Alderoty detailed last month that the SEC lost to Ripple three times. The first was when District Judge Analisa Torres ruled that “as a matter of law, XRP is not a security.” The second was when the SEC’s bid for an interlocutory appeal was denied, and the third was when the securities regulator dropped all charges against Ripple CEO Brad Garlinghouse and co-founder Chris Larsen.
Nonetheless, SEC Chairman Gary Gensler continues to bring enforcement actions against crypto firms. He has stated many times that the crypto industry is a field that is rife with fraud, abuse, and misconduct.
How do you view the finding by another federal court that the SEC acted arbitrarily and capriciously? Let us know in the comments section below.