Ripple (XRP) CTO David Schwartz Breaks Down Howey Test Following SEC Appeal

In an Aug. 14 post on X, David Schwartz stated that the determination in the XRP case was based on whether a court is “confined to look at the formal terms of a single contract to determine if it is an investment.”

• In Schwartz’s opinion, the key takeaway from the XRP ruling is that when applying the Howey test to establish whether an asset is a security, regulators cannot limit themselves to a superficial examination of a contract’s content.

The issue in Howey was whether the court was confined to looking at the formal terms of a single contract to determine if it was an investment contract. The holding is that you can’t *just* look at the contract, not that there doesn’t have to be a contract.

• In other words, the Howey test doesn’t imply that the requirements for a contract are waived altogether but that a comprehensive analysis beyond just the contract’s formalities is needed to determine whether it is a security.
• Schwartz’s statement comes in the wake of the SEC announcing that it will appeal XRP’s partial victory against it.
• The legal battles have taken their toll on XRP’s price. Investor’s confidence has waned following the SEC’s notice of appeal, which has caused a build-up of selling pressure and a 33% drop in the value of XRP in the last weeks.
• However, the token seems to have shaken off some of the market’s languor, with analysts observing a golden cross on XRP’s three-day chart for the first time since December 2020.
• It is the third time in XRP’s history that the golden cross has appeared on its charts. On the other two occasions, it preceded impressive bull runs, including a 12,437% price hike that saw XRP reach an all-time high of $3.317.