- Ripple CTO, David Schwartz, questions the SEC’s altered terminology in its dealings with cryptocurrency entities.
- Legal experts highlight inconsistencies in Judge Torres’s decision, raising further debate on Ripple’s case.
Dissecting the SEC’s Shift in Cryptocurrency Terminology
With the ongoing Ripple versus SEC saga still awaiting its climax, numerous individuals, especially those familiar with the case, are voicing their insights and concerns. A focal point of these discussions has been Judge Analisa Torres’s summary judgment.
One such voice joining the fray is Ripple’s Chief Technical Officer, David Schwartz. On August 11, Schwartz weighed in on what lawyer Bill Morgan identified as a “subtle but significant change” in the SEC’s language. The SEC, in a settlement with cryptocurrency exchange Bittrex and its CEO William Shihara, transitioned from using “selling digital asset securities” to “crypto assets offered and sold as securities.”
Drawing Parallels: XRP and Howey’s Orange Groves
Schwartz, in an attempt to elucidate the complexity surrounding this change, drew a parallel between the XRP token and the infamous Howey orange groves. The Howey case saw real estate brokers offering and selling orange groves as securities. Schwartz, highlighting the distinction, noted that the same brokers wouldn’t violate any regulations if they were selling these orange groves as simple asset sales.
Building upon this, Ripple’s CTO further expounded that the mere act of selling something as a security doesn’t necessarily define it as one. In the Howey scenario, it wasn’t about reselling the orange trees. It revolved around the
“transferring contractual rights and obligations.”
Schwartz elaborated,
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“Just because something is offered or sold as a security, because of its investment contract nature, it doesn’t inherently transform the sold item into a security.”
Legal expert Bill Morgan delved deeper into Judge Torres’s decision, expressing reservations about her lumping sales to on-demand liquidity (ODL) customers with other institutional sales. Morgan queried,
“Where is the promise of a share in profits? How does this equate to an investment? It’s evident these ODL users sold or exchanged their XRP rapidly.”
Morgan further spotlighted a group of six securities law scholars who filed an amicus brief supporting Coinbase in a case against the SEC. This group questioned the accuracy of Judge Torres’s verdict against Ripple. If these scholars’ stance holds weight, there might be some discrepancies in Torres’s judgment.
While the legal arguments ensue, XRP, the crux of this judicial battle, currently stands at $0.626, reflecting a 0.44% drop on the day, a 2.27% weekly gain, and a monthly decline of 13.83%.
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