Podcast Notes | Conversation with Polygon's General Counsel: After the Ripple Case, Where Is Crypto Regulation Headed?
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Podcast Notes | Conversation with Polygon's General Counsel: After the Ripple Case, Where Is Crypto Regulation Headed?
There is money in the investment sense only when investors have transferred a definable and tangible consideration to the entrepreneur.
Navigating Web3 tides with focused insightsCompilation & Translation: TechFlow
On a recent episode of Empire, Santi invited Rebecca Rettig, Chief Legal Officer at Polygon, and Jake Chervinsky, Chief Legal Officer at Blockchain Association, to discuss the landmark Ripple case and its far-reaching implications. They explored how it might affect future legislation, token sale practices, decentralization, governance, and provided updates on MiCA and EU regulations.
Host: Santi, Empire
Guests: Rebecca Rettig, Chief Legal Officer at Polygon; Jake Chervinsky, Chief Legal Officer at Blockchain Association
Video Credit: Empire Podcast
Podcast: Link
Release Date: July 20
About the Ripple Case Itself
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Rebecca Rettig detailed the background of the Ripple case and the court's ruling. The case was heard in a district court in the Southern District of New York, focusing on whether Ripple conducted unregistered sales of securities. The court conducted a thorough factual review and partially sided with the SEC, while also partially supporting Ripple’s position.
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Rebecca explained that the case involved three basic types of sales: institutional sales (selling tokens to VCs, etc.), programmatic sales (Ripple selling XRP on centralized exchanges where buyers and sellers are unaware of each other), and other distributions (such as distributing XRP as payment or through the Spring program).
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The court found that Ripple did conduct unregistered sales of securities in institutional sales—consistent with outcomes in prior cases involving Kik and Telegram in the Southern District of New York. However, in programmatic sales, the court determined these were not unregistered securities sales, partly because buyers did not know they were purchasing directly from Ripple.
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Additionally, the court ruled that giving tokens to employees does not constitute an unregistered securities sale since there is no actual exchange of consideration. Similarly, grant programs like the Spring initiative do not amount to unregistered securities sales.
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Jake Chervinsky offered further interpretation. He emphasized that this outcome is a major victory because it fundamentally undermines the SEC’s theory—that if a token was initially sold as an investment contract, then the token itself always represents a security. The court instead held that the investment contract analysis focuses not on the asset itself, but on the nature of the transaction.
Potential Impacts of the Ripple Decision
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Jake noted that one of the biggest winners from this decision are exchanges. Previously, the SEC argued that such tokens inherently represented investment contracts—and thus securities—so when Coinbase created a secondary market listing these tokens for trading, it violated federal law. Now, based on this ruling, that may no longer be the case.
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Jake also discussed the impact on airdrops. He argued that there must be a defined and tangible exchange of value from investors to entrepreneurs for it to qualify as investment under securities law. This means that if you receive an airdrop without transferring any assets to the creators or distributors of the token, you have not made an investment. Therefore, he believes such airdrops would not be considered securities under this ruling.
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Then, host Santi asked Rebecca Rettig for her view on airdrops, and whether regulators like the SEC could argue that your expenditure of energy, capital, or opportunity cost in qualifying for an airdrop constitutes an investment.
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Rebecca responded that such arguments might have some merit, but in the Ripple case, the judge concluded there was no transfer of money, which differs from interpretations by other courts.
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Finally, Santi asked Rebecca whether she thought the SEC might appeal the decision, and whether this could be seen as a definitive win. Rebecca expressed caution, noting that the decision could still be overturned on appeal.
Next Steps in the Ripple Case and Regulatory Developments
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Rebecca explained that appeals can only be filed after all issues in the case are resolved. Whether the SEC will appeal remains uncertain, though she observed a broader shift occurring in policy and regulatory attitudes.
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Jake agreed with Rebecca, adding that even if the SEC appeals after final judgment, it could take months or years before resolution—making speculation about an appeal premature at this stage.
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Jake said he believes the SEC may now think twice before launching further enforcement actions, given that this ruling represents a significant embarrassment for the agency.
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Finally, they discussed how the Ripple decision affects ongoing legislative efforts. Rebecca stated that the ruling has significantly influenced her conversations with Congress and confirmed many industry practices, reshaping perspectives across the crypto space.
Implications for Other Crypto Projects and DAOs
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Both Rebecca and Jake emphasized that this ruling does not mean no tokens can ever be classified as securities. The key takeaway is that the token itself does not embody an investment contract—the nature of the transaction determines whether it qualifies as a security.
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They warned the audience that even if a token has traded for years on active secondary markets and operates within a functional network, if the developing entity continues to raise funds from investors by promising future development, those transactions may still be deemed securities offerings.
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For projects that have conducted private rounds or airdrops, the implication is clear: if your initial transaction was properly structured under a registration exemption—for example, selling only to accredited investors with appropriate lock-up periods—you need not worry about those sales being classified as unregistered securities, since the legal framework already applies.
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They pointed out that a token may represent interests in an entity that a court could interpret as an unincorporated association responsible for operating a protocol as a business. However, this ruling does not resolve the legal status or liability of DAOs, which remains an open and complex question.
Developments in U.S. and European Digital Asset Regulations
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They noted that the McHenry-Thompson bill may reach a House floor vote this fall, but progress in the Senate is likely to be difficult, as it is controlled by Democrats who have shown relatively little interest in advancing cryptocurrency legislation.
(TechFlow note: The McHenry-Thompson bill, introduced by Republican lawmakers Thompson and Patrick McHenry, also known as the Digital Asset Market Structure Bill, aims to establish a new regulatory framework classifying digital assets as either securities or commodities, subject to oversight by either the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC).)
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They then discussed the content and goals of the stablecoin bill, which seeks to create a regulatory framework for stablecoin issuers—a positive development for stablecoins like USDC. While details are still being negotiated, there is strong industry demand for a clear compliance framework, making the outlook generally favorable.
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The speakers also addressed Europe’s MiCA regulation. They noted that MiCA has become law, but implementing technical standards are still being developed by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA).
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Finally, they stressed the importance of political engagement. They encouraged viewers to contact their representatives, express support for crypto policy, and explain why the issue matters personally. They believe this grassroots advocacy is crucial for gaining political attention—especially among younger generations who care deeply about the space.
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