The ongoing legal battle between Ripple and the US Securities and Exchange Commission (SEC) has been a topic of discussion in the cryptocurrency community for some time now. However, Australian-based attorney Bill Morgan recently took to Twitter with insights regarding the Ripple token, XRP. Morgan argued that XRP cannot be classified as a security among all others.
Morgan pointed out that Judge Analisa Torres of the US District Court’s ruling would significantly affect the ongoing case. He stated that XRP would not be categorized as a security if the judge ruled that Ripple’s sales of XRP to On-Demand Liquidity (ODL) customers are not investment contracts and have no indication of profit attached.
This point was in response to a previous Twitter thread from the founder of SeedStarter, Jesse Hynes. Hynes had analyzed the unpredictability of the SEC vs. Ripple case ruling, stating that it could take an unexpected turn. Hynes noted that the blockchain firm could lose the lawsuit on the grounds of violating US securities laws through the sales of XRP in the early days.
Conversely, the court could rule that Ripple did not violate securities laws due to the method used in current XRP sales. This is because XRP sales have been exclusive to ODL clients following the start of the lawsuit in December 2020. Furthermore, Hynes mentioned that the SEC had convinced the judge to rule XRP as a security. However, the outcome still lies with whether or not Judge Torres will follow the SEC’s view.
SeedStarter’s founder explained that if the judge focuses on the legal status of XRP, she will rule that Ripple’s token is not an investment contract.
The attorney maintained that if the judge finds that XRP sales to ODL customers are not investment contracts, XRP is not a security. In response, Hynes stated that the judge might not touch the issue but focus on Ripple sales ignoring XRP and secondary market sales.
To this, Morgan responded that the judge’s latest ruling to unseal Hinman’s document shows that she understands the differences between Ripple’s transition from programmatic and institutional sales of XRP to exclusive sales to ODL customers. The lawyer also explained that the sale of XRP to ODL customers does not conform to the elements of the Howey Test. In his view, Ripple’s sales of XRP to ODL clients can’t form an investment contract, meaning that the alleged XRP sales, which also involved ODL customers, weren’t an investment contract.
Morgan’s analogy illustrated that assets could move from being securities to not being again. However, four major factors could lead to such transitions for digital assets, including economic reality, technology, the law, and the asset’s legal classification in other jurisdictions.
The ongoing Ripple vs. SEC lawsuit has been closely watched by the cryptocurrency industry, and the outcome of the case is essential to the future of XRP. While opinions and discussions float around, Morgan’s input will undoubtedly be valuable to understanding the complexities of the situation.
As the legal proceedings continue, it remains to be seen whether XRP will be deemed a security or not. Whatever the outcome, it will have significant implications for not only Ripple but the broader cryptocurrency industry as well.
