UpdatesMay 24, 2023

Ripple is almost certain to win. XRP made another argument against the SEC

A high-profile court battle between a popular cryptocurrency project and the Securities and Exchange Commission is entering a decisive phase!

The high-profile fight between the US Securities and Exchange Commission (SEC) and the company that issues the XRP cryptocurrency is gaining momentum. Although the U.S. District Court for the Southern District of New York has not yet ruled on the matter, the latest evidence indicates that the token created by Ripple may not be considered a security. This is because it does not meet all the elements of the Howey Test.

Ripple makes another argument against the SEC

The popular American legal commentator John Deaton recently revealed that during another review of the case files, he paid special attention to the e-mails that were sent by the SEC to independent entities, so that they could use the Howey test to check whether the XRP token can be classified from a legal point of view as security .

Based on the Howey test, a product can be classified as a security only if it meets the following cumulative criteria: funds are invested (not only in cash), the investment is in a joint venture, profits are expected and efforts from the issuer or third party, without investor involvement.

Deaton expressed great surprise, asking why the Ripple legal team did not use a number of emails made available for the case by the Securities and Exchange Commission. All these messages, quoted as Exhibit 220, seem to argue very clearly that XRP does not meet all the conditions of the Howey Test after all.

In its lawsuit against Ripple, the SEC has previously argued repeatedly that XRP clearly meets all four elements of Howey's analysis and therefore should be considered a security, subject to registration and any other necessary regulatory requirements under US federal securities law. However, a recent statement from the SEC staff team clearly suggests that there are some serious doubts as to whether XRP actually meets all the necessary criteria, and if not, the SEC could spectacularly lose its lawsuit, setting a precedent in the US legal system.

Consequences of the court battle between Ripple and the SEC

The outcome of the lawsuit against Ripple will certainly have historic significance for the entire digital currency industry. If XRP is found to be a security by the court, it could expose the cryptocurrency project to significant fines and penalties for failing to register with the SEC, forcing the company to file for bankruptcy. It could also set a precedent and a serious threat to other cryptocurrency projects, potentially leading to increased regulatory scrutiny and stricter compliance requirements in the US.