The Securities and Exchange Commission (SEC) is facing a budgetary crunch that could significantly impact its operations, including its ongoing legal battle with Ripple. Fox Business journalist Eleanor Terrett recently reported the major issue issue on X.
She noted that last week, the U.S. Senate Appropriations Committee considered the SEC’s funding request for fiscal year 2025, which SEC Chair Gary Gensler had set at $2.594 billion. However, the Senate proposed allocating only $2.23 billion, marking the agency’s lowest budget since fiscal year 2023.
The SEC Union has expressed concern over staff salary and benefit cuts, attributing these financial constraints to Gensler’s increased spending in fiscal years 2023 and 2024.
Terrett quoted a union memo in the tweet. The memo states that Gensler’s financial decisions placed employees’ compensation and benefits at risk, ultimately leading to consequences for the SEC staff.
This development comes amid ongoing scrutiny of the SEC’s regulatory approach under Gensler, particularly regarding cryptocurrency regulation.
Gensler has been an active proponent of expanding the SEC’s oversight of the crypto industry, emphasizing the need for comprehensive regulation to protect investors and maintain market integrity. The lawsuit between the SEC and Ripple has become a significant focal point in this broader regulatory effort.
The XRP Lawsuit
The SEC initiated its lawsuit against Ripple in December 2020, alleging that the company had violated securities laws by selling XRP tokens as unregistered securities. Ripple contended that XRP should not be classified as a security, arguing that the SEC’s enforcement actions lacked clarity and consistency.
In a landmark decision on July 13, 2023, the court ruled that XRP is not a security when sold on exchanges, dealing a blow to the SEC’s regulatory strategy. The court’s decision was a significant victory for Ripple and challenged the SEC’s approach of regulating the crypto industry through enforcement rather than clear guidelines, a practice criticized by Ripple and other crypto industry players.
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What’s Next for the XRP Lawsuit?
The SEC’s reduced budget could have implications for its ability to pursue aggressive enforcement actions in the crypto space. Gensler was blamed in the union memo for wagering with the staff compensation, and the lawsuit strategy blew up in his face as the SEC faced three consecutive losses against Ripple and other losses in other crypto-related lawsuits in 2023.
This development could be the final domino that causes a change in the SEC’s enforcement strategy. It might also change the trajectory of the XRP lawsuit, as the SEC might choose not to appeal the final ruling if it cannot fund its lawsuits.
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