Crypto Community Divided Over SEC Use of “Crypto Asset Securities”

• Bill Morgan criticizes the SEC’s use of terms like “crypto asset securities,” calling it propaganda.
• Morgan asserts intentional ambiguity and broadness in the SEC’s terms.
• In the context of the debate, Ripple’s CTO argued tokens, like art, are not contracts, transactions, or schemes.

Prominent figures in the crypto community, like Ripple CTO and pro-crypto lawyer Bill Morgan, recently debated the U.S. SEC’s blanket usage of terms like “crypto asset securities” and “crypto securities markets.”

Bill Morgan sparked the conversation, criticizing the SEC’s use of those terms, claiming it was agenda-driven propaganda. According to Morgan, the terms are not present in US securities legislation and only contribute to confusion within the crypto space. 

Moreover, he argued that the SEC, rather than providing clear definitions, hides behind concepts like investment contracts and the Howey test, further adding uncertainty to the market.

Ripple CTO David Schwartz entered the conversation, sharing the SEC’s definition of “crypto-asset security” in the suit with Coinbase. However, he suggested that, if taken literally, the definition would only apply to something akin to tokenized stock. 

Morgan countered, criticizing the broadness of the SEC’s definition, stating that it fails to distinguish a security from a commodity effectively. Meanwhile, X user Joe Sho asserted that the very definition of security sets it apart from a commodity. According to Sho, security represents an enterprise not controlled by the investor, whereas a commodity’s value is determined by the investor’s ability to assess supply and demand.

In response to Joe Sho, Ripple’s CTO challenged the notion, citing examples of investments in diamonds and early-career art. He questioned whether someone who buys a diamond or invests in art sees their fortunes tied to the actions of entities like De Beers or a living painter’s future creations and promotions.

Joe Sho maintained his position, stating that diamonds and art do not represent enterprises, and their value is not tied to the issuer’s future state. He argued that investment contract tokens are fundamentally different.
Ripple CTO countered that early art operates similarly as an investment instrument by design, yet it is not considered an investment contract. He emphasized that tokens, like art, are not contracts, transactions, or schemes.