Ripple v. SEC case update as of August 14, 2023

With the blockchain company Ripple still waiting for the final judgment in the legal standoff against the United States Securities and Exchange Commission (SEC), those close to the case (as well as many others) have been discussing its intricacies, as well as the summary judgment by Judge Analisa Torres.

As it happens, the chief technical officer at Ripple, David Schwartz, joined the discussion, arguing that the “subtle but significant change” in the SEC’s language, pointed out earlier by lawyer Bill Morgan, was “completely incoherent,” as he said on August 11.

Indeed, Morgan earlier highlighted that the SEC no longer used “selling digital asset securities” but “crypto assets offered and sold as securities” in a settlement with cryptocurrency exchange Bittrex and its co-founder and CEO William Shihara.

XRP versus Howey trees

According to Schwartz’s comparison between the XRP token and orange groves in Howey, the real estate brokers offered and sold the latter as securities, but they “would break no laws by selling those very same orange groves in simple asset sales,” as he explained.

More recently, Ripple’s CTO further elaborated that selling something as a security “doesn’t make it one” and that the Howey case did not involve brokers reselling Howey trees but “transferring contractual rights and obligations.” As he continued:

“If they just sold the trees carrying no rights or obligation to or from Howey, they would not be selling a security. That something was offered or sold as a security because the offer was an investment contract doesn’t make the thing sold using the investment contract itself a security.”

That said, Morgan has also commented on the part of Judge Torres’s decision in which she “lumped sales to [on-demand liquidity (ODL)] customers with other sales to institutions,” but that “she did not explain why she did so and why this category of sales were investment contracts.” For instance:

“Where is the promise of a share in profits. How is there an investment. It was part of the undisputed record that these ODL users sold or exchanged their XRP in seconds,” he said.

Furthermore, the legal expert stated that the recent group of six securities law scholars filing an amicus brief supporting Coinbase in the case against the SEC “cast some doubt on the correctness of this finding against Ripple in the Torres decision” and “if the six securities law scholars are correct, it seems Torres J. got this wrong.”

Meanwhile, XRP, the token that is at the center of the ongoing legal court battle, was at press time changing hands at the price of $0.626, indicating a decline of 0.44% on the day, a 2.27% gain across the week, and a 13.83% loss in the last month.

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