š SEC v. Middleton (2019) vs. SEC v. Ripple vs. 2026 OIRA Guidance š
The Core Contradiction:
Phase 1 ā SEC v. Middleton (2019):
The SEC's enforcement posture treated the VERI token as inherently bound to the investment contract. The regulatory premise of that era conflated the digital asset itself with the security. The final judgment operated under the assumption that the token carried the properties of a security indefinitely ā regardless of secondary market dynamics, utility, or decentralized use.
Phase 2 ā SEC v. Ripple (2023):
Under judicial pressure, the SEC was forced to retreat from this position. Key admissions include:
1. The Footnote (August 2023 Memorandum in Support of Interlocutory Appeal): The SEC explicitly stated: "The SEC does not contend that the XRP token itself is a security." This was a formal, on-the-record concession that the digital asset ā the code ā is not inherently a security.
2. Judge Torres' Ruling (July 2023): The Court held that XRP "is not in and of itself a 'contract, transaction[,] or scheme' that embodies the Howey requirements of an investment contract." The SEC did not successfully appeal this finding.
3. The Binance Retreat (2023-2024): In SEC v. Binance, the SEC went further, formally stating it regretted using the term "digital asset security" in prior filings because it improperly conflated the asset with the offering and caused market confusion. This was an extraordinary admission that its own enforcement terminology ā the same terminology used to prosecute cases like Middleton ā was legally flawed.
Phase 3 ā 2026 OIRA Token Taxonomy Guidance:
The SEC's new guidance submitted to the White House attempts to formalize the legal retreat forced upon it in Ripple and Binance. By proposing a "token taxonomy," the SEC is now trying to build a framework that:
⢠Classifies tokens by transaction context, not by the inherent nature of the code
⢠Preserves SEC jurisdiction over offerings and sales, while implicitly conceding the asset itself may not be a security
⢠Creates categories that distinguish between primary issuance (potentially a security) and secondary/decentralized market activity (potentially not)
The Direct Cross-Reference
Is the token a security?
⢠SEC v. Middleton (2019): Treated as inherently yes
⢠SEC v. Ripple (2023): Explicitly conceded no
⢠2026 OIRA Guidance: Building taxonomy to avoid the question
Where does jurisdiction attach?
⢠SEC v. Middleton (2019): To the asset itself
⢠SEC v. Ripple (2023): To the transaction/offering only
⢠2026 OIRA Guidance: To the transaction context and network conditions
Terminology
⢠SEC v. Middleton (2019): "Digital asset security"
⢠SEC v. Ripple (2023): Regretted using "digital asset security"
⢠2026 OIRA Guidance: Proposing formal token classification categories
Implication for secondary markets
⢠SEC v. Middleton (2019): Token remains a security in perpetuity
⢠SEC v. Ripple (2023): Secondary blind bid/ask sales are NOT securities
⢠2026 OIRA Guidance: Attempting to formalize this distinction
šÆ The Bottom Line
The SEC's own evolution ā from prosecuting Middleton on the premise that the token is the security, to formally conceding in Ripple that the token is just code, to now building a taxonomy that avoids calling any token an inherent security ā represents a complete inversion of the legal theory used in 2019.
The 2026 guidance is effectively an attempt to codify the lessons the SEC was forced to learn in Ripple, while quietly abandoning the foundational premise it used to bring enforcement actions against early token generation events like Veritaseum's.