Jeremy Hogan

Lawyer lays out his reasoning on why XRP is not a security

Lawyer Jeremy Hogan believes the United States Securites and Exchange Commission has failed to legally demonstrate that XRP is a security.

Ripple’s XRP (XRP) is not a security because it does not fit the definition of an “investment contract,” the “only” legislative definition that it could “possibly” fit, according to Jeremy Hogan, a partner at the law firm of Hogan & Hogan.

In a series of tweets on April 9, Hogan explained that, in his opinion, XRP could only be considered a security under the definition of an “investment contract,” as it doesn’t fit the other definitions of a security such as stocks or bonds.

Hogan argues, however, that the United States Securities and Exchange Commission has not demonstrated an implied or explicit investment contract in its suit against Ripple.

“Instead it argues that the purchase agreement is all that is required — and that is all it proves,” Hogan stated.

“But that argument tears the ‘investment’ from the ‘contract’ as a simple purchase, without more, [there] cannot be an ‘investment contract,’ it is just an investment (like buying an ounce of gold) as there is no obligation for Ripple to do anything except transfer the asset,” he added.

The SEC initiated a lawsuit in December 2020, claiming that Ripple illegally sold its XRP token as an unregistered security.

Ripple has long disputed the claim, arguing that XRP doesn’t constitute an investment contract under the Howey test — a legal test used to determine if a transaction qualifies as an investment contract. The test was established in 1946 by the U.S. Supreme Court in the SEC v. W.J. case.

Hogan further argues that all of the “blue sky” cases, which the Howey case relies on for defining an “investment contract,” involved some form of a contract regarding the investment.

Related: Ripple CEO: XRP lawsuit resolved by June, SEC conduct ‘embarrassing’

“Indeed, how can a person ‘reasonably rely’ on an offeror to make them a profit when they have zero legal recourse when that offeror fails to come through?” he said.

“They cannot. Even the oft-quoted four-part test implies that a ‘contract’ of some sort is required.”

Hogan says the crux of the issue is not whether Ripple used money from the sale of XRP to fund its business, but if the SEC has proven that there was either an implied or explicit “contract” between Ripple and XRP purchasers relating to their “investment.”

“There was no such contract,” Hogan claimed.

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Ripple, SEC case heads for conclusion after ‘summary judgment’ filed

Ripple argued that XRP profits came from “market forces of supply and demand” rather than any contract between Ripple and XRP token holders.

The U.S. Securities and Exchange Commission (SEC) and Ripple Labs have both called for a federal judge to make an immediate ruling on whether Ripple’s XRP sales violated U.S. securities laws.

In separate motions filed on Sept. 17 by Ripple and the SEC, both have called for a summary judgment in the U.S. District Court Southern District of New York. 

Summary judgments are submitted to the courts when a party involved believes there’s enough evidence at hand to make a ruling without the need to proceed to trial.

Both parties have called on Judge Analisa Torres to make an immediate ruling as to whether Ripple’s XRP sales violated U.S. securities laws. Ripple has argued that the SEC has run out of answers to prove XRP sales constituted an “investment contract,” while the SEC has held strong on its beliefs that it does. 

Ripple CEO Brad Garlinghouse in a Twitter post on Sept. 17 said the filings made it clear that the SEC “isn’t interested in applying the law.”

“They want to remake it all in an impermissible effort to expand their jurisdiction far beyond the authority granted to them by Congress,” he said.

Meanwhile, Ripple general counsel Stuart Alderoty noted that “after two years of litigation” the SEC is “unable to identify any contract for investment” and “cannot satisfy a single prong of the Supreme Court Howey test.”

In its motion for summary judgment, Ripple claimed that the SEC’s case “boils down to an impermissibly open-ended assertion of jurisdiction over any transfer of an asset.”

The motion also argued that the SEC cannot establish that XRP token holders could not “reasonably expect profits” based on Ripple’s efforts as there were no contract obligations between Ripple and XRP token holders.

On the other hand, the SEC’s own motion for summary judgment argued that there can be an “investment contract” without a contract, any rights granted to the purchaser, and without any obligations to the issuer.

But Ripple argued in its motion “that is not and should not be the law, because without these essential features there is nothing to which the Howey test can sensibly be applied.”

Related: The SEC vs. Ripple lawsuit: Everything you need to know

Ripple instead pointed to profits coming from “market forces of supply and demand,” something that the SEC “conceded” according to the Ripple motion.

The significance of this admission was highlighted by U.S. Attorney Jeremy Hogan in a Sept. 17 post on Twitter, stating that “these concessions are perfect for a summary judgment.”

Community reaction

The filing of the Ripple and SEC motions brought about mostly positive sentiment from the XRP community, with one Twitter user believing “the end is near”:

The motion for summary judgment comes nearly two years after the SEC sued Ripple, former CEO Christian Larsen and current CEO Brad Garlinghouse in Dec. 2020 for allegedly raising $1.3 billion through unregistered securities sales through XRP.

If the court executes the summary judgment, the court ruling will have a profound impact on determining which cryptocurrencies constitute a security under U.S. securities laws.

The XRP token rose to highs not seen since July following the motion filing — reaching nearly $0.40, but has fallen slightly since then and is currently priced at $0.34, according to CoinGecko.

Ripple, SEC case heads for conclusion after ‘summary judgment’ filed

Ripple argued that XRP profits came from “market forces of supply and demand” rather than any contract between Ripple and XRP tokenholders.

The United States Securities and Exchange Commission (SEC) and Ripple Labs have both called for a federal judge to make an immediate ruling on whether Ripple’s XRP sales violated U.S. securities laws.

In separate motions filed on Saturday by Ripple and the SEC, both have called for a summary judgment in the U.S. District Court Southern District of New York. 

Summary judgments are submitted to the courts when a party involved believes there’s enough evidence at hand to make a ruling without the need to proceed to trial.

Both parties have called on Judge Analisa Torres to make an immediate ruling as to whether Ripple’s XRP sales violated U.S. securities laws. Ripple has argued that the SEC has run out of answers to prove XRP sales constituted an “investment contract,” while the SEC has held strong on its beliefs that it does. 

Ripple CEO Brad Garlinghouse, in a Twitter post on Saturday, said the filings made it clear that the SEC “isn’t interested in applying the law.”

“They want to remake it all in an impermissible effort to expand their jurisdiction far beyond the authority granted to them by Congress,” he said.

Meanwhile, Ripple general counsel Stuart Alderoty noted that “after two years of litigation,” the SEC is “unable to identify any contract for investment” and “cannot satisfy a single prong of the Supreme Court Howey test.”

In its motion for summary judgment, Ripple claimed that the SEC’s case “boils down to an impermissibly open-ended assertion of jurisdiction over any transfer of an asset.”

The motion also argued that the SEC cannot establish that XRP tokenholders could not “reasonably expect profits” based on Ripple’s efforts as there were no contract obligations between Ripple and XRP tokenholders.

On the other hand, the SEC’s own motion for summary judgment argued that there can be an “investment contract” without a contract, any rights granted to the purchaser and without any obligations to the issuer.

But, Ripple argued in its motion, “that is not and should not be the law, because without these essential features there is nothing to which the Howey test can sensibly be applied.”

Related: The SEC vs. Ripple lawsuit: Everything you need to know

Ripple instead pointed to profits coming from “market forces of supply and demand,” something that the SEC “conceded,” according to the Ripple motion.

The significance of this admission was highlighted by U.S. Attorney Jeremy Hogan in a Saturday post on Twitter, stating that “these concessions are perfect for a summary judgment.”

Community reaction

The filing of the Ripple and SEC motions brought about mostly positive sentiment from the XRP community, with one Twitter user believing “the end is near:”

The motion for summary judgment comes nearly two years after the SEC sued Ripple, former CEO Christian Larsen and current CEO Brad Garlinghouse in Dec. 2020 for allegedly raising $1.3 billion through unregistered securities sales through XRP.

If the court executes the summary judgment, the court ruling will have a profound impact on determining which cryptocurrencies constitute a security under U.S. securities laws.

The XRP token rose to highs not seen since July following the motion filing — reaching nearly $0.40, but has fallen slightly since then and is currently priced at $0.34, according to CoinGecko.