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A federal judge has denied Ripple’s request to compel the U.S. Securities and Exchange Commission (SEC) to reveal whether it previously allowed its employees to trade XRP.
The SEC requires its employees to seek clearance before they trade any security. However, the SEC had not adopted any policy restricting its employees from trading digital assets until January of 2018, according to Ripple.
Ripple says that the SEC’s early 2018 policy for employees stated that digital assets could be subject to the SEC’s prohibitions against securities transactions, but the agency “neither declared all digital assets to be securities nor addressed whether any particular digital asset is a security in the SEC’s view.”
Four months after the SEC released its internal policy, the agency added XRP to a “watch list” of entities potentially subject to supplemental ethics rules. The regulator eventually prohibited its employees from trading the crypto asset, but not until March 2019, says Ripple. That’s when it issued a “formal order of investigation” on the San Francisco-based payments company.
Earlier this month, Ripple’s lawyers argued that the SEC’s timeline of internal policies indicates it had not concluded whether sales and offers of XRP were securities transactions until at least January 2018.
The San Francisco-based company asked to see whether any employees requested to trade XRP, Bitcoin, and Ethereum during the period when there wasn’t a clear policy on the asset, and what the SEC allowed or didn’t allow them to do.
The SEC then promptly asked the court to reject Ripple’s motion on the basis that any information regarding their employees’ trading history is irrelevant to the case. The regulator also said it would be an invasion of privacy.
U.S. Magistrate Judge Sarah Netburn sided with the SEC on Tuesday, ruling that such information wouldn’t provide any clarity on whether XRP is a security or not.
“Because the preclearance process does not consider whether an asset is a security, Defendants have not shown that such individual trading decisions bear on the issues in this case. Although the SEC’s policies (or absence of policies) may provide relevant evidence related to fair notice or recklessness, how an Ethics Counsel viewed a trading decision is more likely to cause confusion or create collateral litigation disputes.”
Netburn also says the information isn’t meaningful enough to justify intruding on the private financial conduct of SEC employees, even in anonymized or aggregated form.