Why XRP Doesn’t Fit the Bill as a Security: Insights from Legal Experts

Understanding the Legal Standpoint

Jeremy Hogan, a prominent attorney at Hogan & Hogan, recently took to Twitter to clarify why he believes XRP—Ripple’s cryptocurrency—should not be classified as a security. His argument hinges on the definition of an “investment contract,” the only legal term XRP could potentially fall under, according to Hogan. This perspective stands out because, while the SEC has made claims against Ripple, their evidence appears shaky at best.

What Makes XRP Different?

Hogan argues that under traditional definitions, XRP doesn’t equate to stocks or bonds, which makes it a fish out of water when considering security classifications. His #1 reason? It can only possibly fit under the umbrella of an “investment contract.” This point is telling, as even the SEC acknowledges this limitation when categorizing XRP.

The SEC’s Argument: A House of Cards?

In his analysis, Hogan critiques the SEC’s premise that a purchase agreement alone substantiates an investment contract. He humorously states that such a notion strips the word “investment” from “contract,” leaving nothing but a vanilla transaction devoid of obligations. “It’s as if buying an ounce of gold automatically makes the seller your business partner!” he quips, highlighting the absurdity of the SEC’s stance.

The Howey Test and Its Implications

The famous Howey test—established by the U.S. Supreme Court—typically distinguishes investment contracts from ordinary transactions. Hogan’s assertion is that all prior cases related to this test involved some form of contract about the investment itself. He raises the crucial question: How can investors expect to profit if there are no legal bindings ensuring that the seller will uphold their end of the deal? Their hope simply doesn’t cut it!

Is There a Contract or Not?

The centerpiece of Hogan’s argument is whether the SEC has successfully demonstrated that an implied or explicit contract existed between Ripple and the purchasers of XRP. “Spoiler alert: there wasn’t one,” Hogan firmly concludes, making a compelling case against the SEC’s overarching claims.

As the legal battle continues, Ripple maintains that its community-centric vision and transparent operations do not fit the mold of an unregistered security. As more discussions unfold, the cryptocurrency world holds its breath to see how this legal drama plays out.