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- Newly discovered internal emails from the U.S. Securities and Exchange Commission (SEC) may suggest that Ripple’s XRP token does not fit the criteria of the Howey Test, thereby potentially exempting it from being classified as a security.
- Despite speculations of a settlement between Ripple and the SEC, John Deaton, a pro-XRP lawyer, believes that SEC Chair Gary Gensler, known for his tough stance on the crypto industry, is determined to see the lawsuit to the end.
Reclassification of Ripple’s XRP: A Possibility?
Recent findings of internal emails from the U.S. Securities and Exchange Commission (SEC) may indicate that Ripple’s XRP token might not be categorized as a security. These emails reveal the potentiality of XRP not fulfilling all the requirements of the Howey Test, a criterion set to determine if certain transactions qualify as investment contracts. The information was brought to light by legal commentator, John Deaton, who found references to these emails in Ripple’s opposition and reply briefs’ footnotes.
Deaton expressed his bewilderment at the limited attention drawn by Ripple’s legal team to these emails’ potential implications. The cited emails, known as Exhibit 220, provide possible reasons to believe that XRP might not satisfy all Howey Test’s factors. Deaton admits that the emails’ significance initially went unnoticed due to their context within a sentence discussing the analyses sent to the SEC by independent market participants, which concluded that XRP was not a security.
Ripple vs. SEC: Settlement or Showdown?
Amid the ongoing legal wrangle, there has been speculation that a settlement might be under negotiation between Ripple, the payment firm, and the SEC. Ripple recently requested a one-week extension to submit public, redacted versions of its cross-motions for summary judgment and supporting exhibits, which include the ‘Hinman documents.’ These documents contain internal SEC discussions about a speech given by the former SEC Director William Hinman in 2018, declaring that both Bitcoin (BTC) and Ethereum (ETH) are not securities.
However, John Deaton, an attorney, and XRP advocate believes that the unsealing of the Hinman documents will not dissuade the SEC from pursuing the case. He opines that if these documents were to lead to a settlement, it would have occurred before they were handed over to Ripple. Deaton thinks that the SEC Chair, Gary Gensler, who has taken a firm stance against the crypto industry, is resolved to see the lawsuit to completion, stating,
“Gensler is moving forward full steam.”
This lawsuit has been ongoing since December 2020 when the SEC sued Ripple for allegedly selling XRP as an unregistered security.