On June 14, 2018, William Hinman, then-Director of the SEC’s Division of Corporation Finance, was giving a talk at Yahoo Finance’s All Markets Summit when he said he did not think that sales of cryptocurrencies Ether and Bitcoin were securities transactions. Director William Hinman, Division of Corporation Finance, Remarks at the Yahoo Finance All Markets Summit, Crypto (Digital Asset Transactions: When Howey Met Gary (Plastic) (June 14, 2018); see also SEC v. Ripple Labs, ECF No. 51, Ripple’s Answer to SEC’s First Amendment Complaint, at 98 (S.D.N.Y. March 4, 2021). Some in attendance may not have given his comment much significance, and perhaps for good reason. Hinman’s speech, on the regulation of digital assets under the federal securities laws, was expressly personal—Hinman began his speech with the familiar disclaimer that is required by SEC regulations to accompany its employees’ personal statements: “My remarks are mine alone, not necessarily those of the Commission, the Commissioners, or the staff.” See SEC v. Ripple Labs, Hinman Decl. para. 11. (S.D.N.Y. June 23, 2021). However, despite the disclaimer and the informal setting, Hinman’s comment would loom large a few years later in the SEC’s high-profile enforcement action against Ripple Labs, in which the SEC contends Ripple raised $1.3 billion in an unregistered offering of the cryptocurrency XRP. (King & Spalding represents Ripple in a consolidated class action filed against it by XRP purchasers who make similar allegations as the SEC.) A pillar of Ripple’s defense is that it had not been put on “fair notice” that its offering was illegal because Hinman’s speech, among other signals, led Ripple to believe that the SEC would not consider XRP a security within the SEC’s jurisdiction. Ripple’s Answer, supra at 98.

As the case has played out, the SEC has taken inconsistent stances on the authoritativeness of Hinman’s speech. In response to Ripple’s fair-notice defense, the SEC first emphasized the speech’s disclaimer in disavowing its contents as merely Hinman’s individual views, not the Commission’s. SEC v. Ripple Labs, Opp. to Motion for Partial Reconsideration and Clarification, at 3, 5 (S.D.N.Y. Feb. 25, 2022). But when faced with Ripple’s discovery demand to produce internal discussions leading up to the speech, the SEC claimed the documents related to its preparation were privileged as “essential links” of legal consultation in the official policymaking process that produced 2019 agency guidance on financial technology. Id. at 6-7. Ripple memorably described the inconsistency as reflecting a desire that the speech occupy an “administrative twilight zone—somewhere between a ‘personal view’ and ‘agency policy.’” Id.