Internal Concerns Surface Over SEC's Stance on Ether

Documents related to William Hinman's 2018 speech have been released as part of the ongoing legal battle between the US Securities and Exchange Commission (SEC) and Ripple. The documents shed light on internal discussions within the SEC prior to Hinman's public statement that "Ether was not a security." 

Email correspondence among SEC employees reveals that Hinman sent an email to multiple colleagues before the speech, stating that he did not see a need to regulate Ether as a security based on its current offering. The Trading and Markets Department expressed support for the speech, as it addressed the concerns of the public and market participants. However, there were concerns within the SEC regarding the wording of the speech. 

The Trading and Markets Department feared that the extensive list of factors mentioned in the speech, which went beyond the typical Howey analysis, could lead to confusion about what constitutes a security. Additionally, some SEC officials have reportedly expressed reservations about the opinion that Ether was not a security. These revelations have raised questions about the agency's position and the credibility of Hinman's speech.

The significance of Hinman's speech became evident in 2020 when the SEC sued Ripple, alleging that the sale of XRP constituted an unregistered securities offering. Ripple argued that the SEC failed to provide clear guidance on which tokens qualified as securities. The SEC previously asserted that Hinman's speech reflected his personal view rather than the agency's stance. However, with the release of these documents, that claim is now under scrutiny.

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Ripple Calls for Investigation into SEC's Handling of Hinman's Speech

Eleanor Terrett, a journalist from Fox Business, commented that this revelation could potentially undermine the SEC lawyers' argument that the speech was solely Hinman's opinion and not intended as official guidance.

Stuart Alderoty, Chief Legal Officer at Ripple, called for a fresh investigation into Hinman and his speech. Alderoty highlighted that the documents showed Hinman ignored warnings about the speech's flawed analysis and potential for confusion in the market. He emphasized that both Hinman and the SEC promoted the speech as guidance, contrary to claims that it was merely an individual opinion.

Ripple CEO Brad Garlinghouse echoed these concerns, describing the SEC's decision to proceed with the speech despite significant pushback as "absolutely unconscionable." 

The concerns reportedly arose within the SEC over the speech's wording, fearing confusion and reservations about Hinman's opinion.