Escrow Freeze Is Reasonable for XRP, Says Law Veteran

In a recent discussion regarding the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC), former attorney and former SEC director in San Francisco, Mark Fagel, has expressed his agreement with a contentious opinion from a member of the XRP community. The focal point of the discussion revolves around the desired outcome in the SEC’s case against Ripple.

The debate was ignited by a tweet from an XRP community member, who shared their dream scenario for the case. They suggested that Ripple should be fined, with the majority of the escrow funds handed over to the SEC and permanently locked away. However, they proposed that moving forward, all circulating XRP should be classified as a commodity.

To this, Fagel responded, “Sounds reasonable enough,” indicating his alignment with this viewpoint.

What’s going on?

This discussion gained traction following the SEC’s recent advancement of their legal theory on secondary market sales in response to Coinbase’s motion. Citing legal precedents, the SEC argues that the economic reality of a transaction involving a crypto asset security is not altered simply because it becomes available on a trading platform like Coinbase.

The SEC’s SJ submissions contend there was de minimis utility during the period covered by the lawsuit, and that’s why there was a securities offering. The situation today may be different, which is why the secondary market issue is more complicated.

— Marc Fagel (@Marc_Fagel) July 8, 2023

Regarding the SEC’s statement, Fagel expressed his personal belief that it aligns with the policy and intent of securities laws. However, he acknowledged that whether it is supported by legal precedents remains uncertain. Fagel emphasized the complexity of determining if successive sales of a token involve securities, especially when considering a token’s utility and potential transformation over time.