Ripple Vs SEC: Attorney Explains How Judge Torres Might Conclude That XRP Was Not Sold as a Security

Ripple has been involved in a long-standing legal battle with the Securities and Exchange Commission (SEC) over whether its cryptocurrency XRP is a security. Recently, Jeremy Hogan took to his Twitter handle and explained how Judge Torres’ opinion provided a clue as to how she might find that XRP was not sold as a security. He explored the reason why Ripple did not sell XRP as a security.

Before delving into the details, it is essential to understand the Howey test. The test is a legal standard used to determine whether a transaction qualifies as an “investment contract.” The SEC considers investment contracts to be securities, and therefore, subject to its regulations.

Expert Witnesses

The SEC retained two expert witnesses to provide an opinion on whether XRP was a security. One expert stated that XRP purchasers were relying on the efforts of Ripple, while the other expert testified that Ripple manipulated the price of XRP.

However, the Judge specifically struck the part of the first expert’s testimony that stated XRP purchasers were relying on the efforts of Ripple. This left the SEC with the second expert witness as the sole expert to testify about the third prong of the Howey test.

Lack of Evidence

The SEC presented a “cacophony” of various statements made by Ripple as its evidence of the third prong. These included “marketing materials,” Tweets, and statements that an increase in XRP’s price was “Ripplemania.” However, there was no evidence that XRP buyers saw these things

On the other hand, Ripple had witnesses who testified that XRP was publicly deemed a currency and an asset, not a security. Ripple also had thousands of XRP buyers to counter the six XRP holders involved in a class action who said otherwise.

Furthermore, the SEC’s own expert admitted that most XRP price movements since 2018 had no relation to anything Ripple did. Therefore, the overwhelming majority of evidence suggested that XRP purchasers did not rely on the efforts of Ripple.

In conclusion, no reasonable juror could view the paucity of evidence presented by the SEC and come to the conclusion that the SEC met its burden of proving prong #3 of the Howey test. The fact that Ripple had thousands of XRP buyers and several witnesses testifying that XRP was not secure significantly strengthens its argument.