Brian Korn, a partner at Manatt, Phelps & Phillips LLP, a Los Angeles-based law firm consisting of over 450 attorneys, has recently presented an insightful argument regarding the legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple. This case holds significant implications for the broader cryptocurrency industry’s secondary market.
The ruling, which was issued on July 13, introduced intriguing implications for the entire crypto market. Although Judge Torres explicitly stated in a footnote that she is not addressing whether all secondary trading in XRP is covered by federal securities law, Brian Korn highlighted that her classification of institutional XRP sales as investment contracts while excluding programmatic sales from this category raises questions about the broader implications for secondary securities sales in the crypto field.
In particular, the court’s pivotal statement emphasized that speculative investors must have a reasonable expectation of profits derived from the entrepreneurial efforts of others for a sale to be classified as a securities offering. Korn expressed curiosity about the court’s decision, remarking that it establishes a distinction based on whether an investor had the intention to profit from the enterprise or simply saw the token as one that may gain value. This raises fundamental questions about the nature of investments in the crypto space and how investor intent is assessed in various sales.
Korn further elaborated on the potential complexities stemming from this ruling. He pointed out that if this decision were expanded more widely, it would call into question whether secondary stock trading also involves securities. Stocks, as he noted, frequently fluctuate in value, and even industry experts often have varying opinions on the direction of a particular listing. This prompts the question of whether fundamental investors are categorized as purchasing and selling securities while technical strategists and index buyers are not.
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Ram Ahluwalia, CEO of Lumida Wealth, commented that both sides in the SEC vs. Ripple case are likely to appeal the court’s decision. He further noted that the judiciary is continuously interpreting securities laws, which were not designed to handle decentralized technologies. Despite this, the ruling can be seen as a victory for decentralized protocols, with Ripple emerging as the winner.
At the time of writing, the price of XRP was $0.717. It had recently stabilized following a significant rally that occurred after the summary judgment in the SEC vs. Ripple case.
In conclusion, Brian Korn’s thought-provoking argument highlights the implications of the court’s ruling in the SEC vs. Ripple case for the broader crypto industry. The distinction made between institutional and programmatic sales raises questions about the nature of investments and investor intent in the crypto space. As the case continues to unfold, it will have far-reaching consequences for the classification of securities and the regulation of the secondary market in cryptocurrencies.
