Stuart Alderoty, Ripple’s Chief Legal Officer (CLO), has recently weighed in on the upcoming trial of the SEC Internal Adjudication Process involving Jarkesy.
The Wall Street Journal reports that the SEC v. Jarkesy case hearing is scheduled to begin tomorrow at the U.S. Supreme Court.
Jarkesy contends that the internal adjudication process, wherein an SEC administrative law judge presides without a jury, infringes upon his Seventh Amendment rights, which dictates that as a citizen of the United States, he has a right to a jury trial in civil cases.
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The SEC internal adjudication process goes against this, typically resulting in a decisive victory for the regulator over defendants, as a singular entity assumes the roles of judge, jury, and enforcer.
In 2014, Jarkesy’s administrative trial had a favorable outcome for the SEC, prompting the defendant to challenge the case in the Supreme Court. The court has scheduled a hearing for tomorrow.
Notably, American billionaires Mark Cuban and Elon Musk had previously jointly submitted an amicus brief. They contended that the SEC’s administrative proceedings often lead to divergent outcomes for entities accused by the regulator.
Alderoty Weighs In
The case also caught the attention of Ripple Chief Legal Officer (CLO) Stuart Alderoty, who shared his opinion on X.
He wrote, “To paraphrase Gary Gensler, looks like “the runway is getting shorter”…for the SEC”.
To paraphrase Gary Gensler, looks like "the runway is getting shorter" …for the SEChttps://t.co/ifwdAdpvQ8
— Stuart Alderoty (@s_alderoty) November 27, 2023
With the Supreme Court about to hear this case, the SEC’s days of conducting internal proceedings could end soon. A loss like this could be a major setback for the regulator, just like Ripple’s victories in the XRP lawsuit.
The Dominance of SEC’s In-House Proceedings
The SEC has a strong track record enforcing securities laws, particularly highlighted by its 2014 in-house proceedings. In over 200 cases, it achieved a 100% success rate, compared to a 61% success rate in federal courts.
Administrative proceedings, managed by SEC-appointed administrative law judges (ALJs), provide the SEC with a home-court advantage due to the judges’ expertise in securities law and their considerable discretion during hearings. The regulator benefits from procedural advantages, such as a lower burden of proof.
Read Also: Ripple CLO On SEC Chair’s Evasive Testimony: “Gensler Didn’t Know What Hit Him”
The SEC can also use unauthenticated documents and hearsay evidence in administrative proceedings, which wouldn’t be admissible in federal court. These procedural advantages contribute to the SEC’s high success rate in administrative proceedings, winning all 202 cases brought within this framework in 2014.
While the SEC’s success in administrative proceedings has faced criticism for potentially granting the regulator too much power, proponents argue that it reflects the agency’s effectiveness as a law enforcement entity.
Losing this case will reflect the SEC’s weakening power under Gary Gensler, as the crypto community has constantly exposed the regulator for its hypocrisy in its practices.
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