FOX’s Charles Gasparino Questions Expectations of Buyers of Ripple’s XRP Sales

Gasparino continues to weigh in on the SEC lawsuit against Ripple.

FOX Business’s Charles Gasparino has questioned buyers’ expectations of Ripple’s XRP sales.

The senior correspondent did so in a tweet yesterday, combining three prongs of the Howey test.

• An investment of money 
• with the expectation of profits 
• to be derived from the profit of others 

Notably, Gasparino ignored the second prong, which says the investment must be in a common enterprise. All four define an investment contract.

“Per Howey, an asset that is sold becomes security when the purchaser has a ‘reasonable expectation of profits to be derived from the efforts of others’ What profits were XRP buyers of @Ripple exec sales expecting from Ripple itself? Serious question as the @SECGov case continues,” Gasparino wrote.

Per Howey, an asset that is sold becomes security when the purchaser has a “reasonable expectation of profits to be derived from the efforts of others” What profits were #XRP buyers of @Ripple exec sales expecting from Ripple itself? Serious question as the @SECGov case continues

— Charles Gasparino (@CGasparino) February 2, 2023

In response to Gasparino’s tweet, several users pointed out that they were amongst those that bought in with no knowledge of Ripple or just because it was cheap and they liked the utility. Others poked holes at the correspondent’s framing as he ignored a prong of the Howey test. 

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Bill Morgan, a pro-XRP lawyer, argued that Ripple’s contracts, according to Ripple and as verified by an expert, did not place any obligation on Ripple to increase XRP’s price.

While it looks like Gasparino is trying to make a case for Ripple’s XRP sales representing unregistered security, it still does not justify the US Securities and Exchange Commission’s claims that XRP, the underlying token of the alleged investment contract, is a security. Attorney John E. Deaton, who represents thousands of XRP holders in the SEC case against Ripple as a friend of the court, recently reiterated this in a Twitter thread.

According to Deaton, even if Ripple offered and sold XRP as a security at one point in time or even does so today, it does not make XRP a security. Deaton cites the recent decision in the SEC case against LBRY.

According to Deaton, the judge had clarified that his ruling in favor of the SEC did not extend to secondary market sales of LBRY Credits (LBC). Notably, the attorney in attendance at the hearing says the judge forced the SEC to go on record saying LBC is not a security. It comes on the back of a paper by contracts lawyer Lewis Cohen showing that never in the history of securities law had the court found that the underlying asset of an investment contract is a security.

In the past, Ripple had expressed a willingness to settle if the SEC provided clarity on XRP. The case has spanned over two years and is awaiting the judge’s ruling as everything has been briefed.

Gasparino continues to weigh in on the Ripple case, but his stance has often drawn the ire of the XRP community. Most recently, though, he accused the SEC of having misplaced priorities by going after Ripple while FTX was carrying out potentially fraudulent activities.

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