2 - 4 minute read
XRP token by Ripple has long been a topic of debate amid investors and regulators alike. While Ripple has always maintained that its XRP token is not a security, the United States Securities and Exchange Commission (SEC) initiated a lawsuit in December 2020, claiming that Ripple illegally sold its XRP token as an unregistered security.
Now, Jeremy Hogan, a partner at law firm Hogan & Hogan, has laid out his reasoning on Twitter, outlining that in his opinion, XRP could only be considered a security according to the definition of an “investment contract.” However, he argues that the SEC has not demonstrated an implied or explicit investment contract in its suit against Ripple.
According to Hogan, the legislative definition of a security only allows XRP to possibly fit under the definition of an “investment contract” as it does not fit the other definitions of a security such as stocks or bonds.
“But that argument tears the ‘investment’ from the ‘contract’ as a simple purchase, without more, [there] cannot be an ‘investment contract,’ it is just an investment (like buying an ounce of gold) as there is no obligation for Ripple to do anything except transfer the asset,” Hogan added.
Hogan further argues that all of the “blue sky” cases, which the Howey case relies on for defining an “investment contract,” involved some form of a contract regarding the investment. He believes that the SEC has not proven that there was either an implied or explicit “contract” between Ripple and XRP purchasers relating to their “investment.”
“There was no such contract,” Hogan claimed.
If Hogan’s arguments are proven to be true, it could mean that XRP will no longer be considered a security, thus gravely affecting Ripple and its investors. On the other hand, if the SEC proves that there was an implied or explicit “contract,” Ripple could face severe legal and financial repercussions.
Therefore, investors should keep a close eye on the latest updates regarding the SEC and Ripple lawsuit. With the SEC upping its scrutiny of firms offering or giving advice about crypto, it is important to stay informed and cautious while investing in digital assets.
