‘SEC Has to Prove Every Element by the Greater Weight of the Evidence’

The SEC always believed that XRP is a security, and the agency was pretty confident about it passing the Howey Test. The Howey test determines whether a certain asset is an investment tool or not. Meanwhile, Ripple claims the SEC’s theory of XRP being an investment ignores the fact that the token is a digital asset with a functional ecosystem and a real use case. Hence, the XRP price does not satisfy the Howey test. 

Ripple, ever since the beginning of the lawsuit, has argued that XRP is a currency, similar to other crypto assets like Bitcoin, Ethereum, Cardano, etc. Meanwhile, Attorney Hogan explains in a series of tweets why the SEC cannot just win the lawsuit based on one element of the Howey Test. 

As per Hogan, the SEC needs to either prove all the elements of the test with evidence or else prove the absence of any dispute initially before winning a summary judgment. Hence, Hogan says that the SEC cannot win on the Howey Test based on the claim that the XRP holders expected profit based on the others. 

He says that the SEC was believed to have provided some documents as evidence to display the involvement of Ripple and XRP holders in increasing the price. However, the agency abandoned its expert witness as it failed to prove the Howey test prong.

“Ripple counters the SEC with its own expert’s witness, who correlates XRP price action with market forces, especially since 2018. And Ripple apparently also files 3K affidavits from Deaton and XRP holders that they were NOT looking to Ripple to increase XRP price,”

The SEC has largely failed to offer any substantial evidence to prove that the XRP holders were relying on Ripple for the price to rise. However, Hogan also raises the possibility that Judge Torres may certainly not consider this evidence while granting the summary judgment. Therefore, with no clear proof against the elements of the Howey Test, the SEC may certainly fail here against Ripple.