At the heart of the ongoing Ripple Labs lawsuit is a question:
Is XRP (CRYPTO:XRP) a security?
If it is, then Ripple Labs will be held liable for selling securities without registration.
If it’s not, then the company will be able to go back to life as usual.
This has huge bearing on the entire cryptocurrency market. If XRP is a security, then other cryptocurrencies are as well. In common law countries, legal decisions set precedents. That means that the ruling applies in situations similar to the one the initial lawsuit was based on. Therefore, if the U.S. SEC was to get XRP regulated as a security, it would gain regulatory power over other cryptocurrencies too.
Fortunately, it doesn’t look like that will happen. Most coverage of the SEC v. Ripple lawsuit suggests that Ripple is winning. The SEC’s own officials are on record as saying that cryptos aren’t securities, and the SEC seems to be failing to get that testimony excluded from discovery. Given this fact, it looks like XRP won’t become a security. In this article, I will further bolster that claim by showing that XRP does not meet the definition of a security.
Characteristics of a security The U.S. Securities Act defines the term “security” by a list of examples. The definition does not have any qualitative criteria, but instead consists of the word “any” followed by terms like:
- Stock
- Bond
- Option
- Warrant
- and dozens more
- Real assets (e.g., houses, precious metals)
- Currencies
Why XRP is not a security XRP is not a security because, like most cryptocurrencies, it does not meet the definition of the term in question. First, on the most literal level, the category of asset it belongs to is not included in the definition. Second, there is one asset class that it may belong to (money), and that asset is not a security. Third, and finally, the SEC, who are suing to have XRP regulated as a security, have been caught behind closed doors saying that cryptocurrencies aren’t securities. Unless XRP is qualitatively different from other cryptocurrencies, it is not a security, based on the SEC’s past claims.
It seems like a pretty clear case: XRP isn’t a security. Whether it’s money is debatable. But a security it is not.
The post Ripple: XRP Is NOT a Security! appeared first on The Motley Fool Canada.
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.