Key Points:
- SEC’s evolving stance on XRP’s value.
- Legal implications for cryptocurrencies.
- XRP’s journey from #2 to its current state.
The twists and turns continue in the ongoing legal battle between the United States Securities and Exchange Commission (SEC) and Ripple Labs. It’s essential to recall that the SEC filed a lawsuit against Ripple, alleging the unregistered sale of XRP as securities.
Furthermore, Judge Torres ruled that XRP should not be categorized as a security. As the case progresses toward trial, where the examination centers on whether Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen assisted Ripple in selling XRP to institutional investors, the SEC has initiated a motion to seek an interlocutory appeal regarding programmatic sales of XRP, among other issues.
In this filing, the SEC altered its language, stating that it was not seeking a review of the underlying asset XRP and described it as “merely computer code devoid of intrinsic value.”
Certainly, even UK regulators have asserted that cryptocurrencies lack intrinsic value. However, as crypto observer and attorney Bill Morgan argues, the SEC is now attempting to persuade judges that cryptocurrencies are not commodities. He points out that Judge Torres viewed the Gram token as a commodity, a perspective that the SEC likely disapproves of.
Morgan stated: “I believe the SEC thinks it can simplify its task in certain aspects of Howey in crypto cases by convincing courts that cryptos lack intrinsic value. This implies that issuers must find utility to confer value upon a crypto with no inherent worth.”
Is the SEC Taking Shortcuts?
Morgan believes the SEC is seeking to streamline its approach by convincing courts that cryptocurrencies lack intrinsic value according to the Howey test. This means issuers must establish utility to confer value upon these cryptocurrencies. These efforts fulfill the third prong of Howey, with investors relying on them for value and potential gains. Without these efforts, cryptocurrencies remain without value or price appreciation.
Morgan criticizes this approach as flawed, asserting that the value of XRP derives from its properties and cannot be viewed in isolation from the XRP-Ledger (XRPL). While some have likened it to a new rail for the global payment system, the Australian lawyer compares it to wheels. Much like wheels, whose value lies not independently but in their combination and transformative impact on the world.
What Is the SEC’s Objective?
The question arises: Why is the SEC attempting to treat other cryptocurrencies differently? John E. Deaton, another prominent attorney in the field, contends that the SEC has ‘completely lost sight of its mission and purpose.’ While a 2018 memo may hold critical information, albeit not publicly disclosed, Deaton argues that it does not affirm the SEC’s position that XRP is a security.
This has led to years of uncertainty, during which Ripple sought clarity from the SEC but was met with denials and instructed to “continue discussions with [SEC] staff about it.” Notably, Bill Hinman stated after the memo that Ethereum and Bitcoin were not securities but made no mention of XRP.
At that time, Ripple CEO Brad Garlinghouse lamented, “Ripple is stuck in limbo.” Many attribute the lackluster performance of XRP to the lawsuit and the ongoing efforts by the SEC to enforce regulations against Ripple and XRP. Prior to the lawsuit, XRP held the second position in the crypto market and was regarded as the future of the banking system.
At the time of writing, XRP is trading at $0.5, up by only 0.31% in the past 24 hours, according to data from CoinMarketCap.
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