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HomeCrypto NewsMarketHere’s How SEC Plans to Prove XRP is a Security

Here’s How SEC Plans to Prove XRP is a Security


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Attorney Morgan explains how the SEC plans to prove XRP is a security.

Pro-crypto lawyer Bill Morgan recently took to Twitter to speculate on how the U.S. Securities and Exchange Commission aims to prove XRP is a security.  

Alderoty’s Insight on SEC’s Common Enterprise Argument 

Attorney Morgan’s analysis was in reaction to Ripple Chief Legal Officer Stuart Alderoty’s remark on how the SEC failed to successfully equate the common interest to a common enterprise in the 1946 Howey case. 

According to Alderoty, the SEC unsuccessfully argued in the Supreme Court’s Howey brief that an investment in a common enterprise was unnecessary as long as there was a common interest. 

He asserted that the SEC was wrong in 1946 and is still wrong to date, adding that common interest does not equate to common enterprise. 

How SEC Plans to Prove XRP Is a Security  

Reacting to the post, attorney Morgan said the SEC wants to massively stretch the Howey test to cover crypto since the test was intended to be flexible by the court. 

Per Morgan, the SEC wants to expand the test to cover crypto by an extensive view of common enterprise, which has prompted the regulator to focus on “common” while avoiding the word “enterprise.” 

He noted that the technique has made it difficult for anyone to pinpoint the common enterprise in the SEC vs. Ripple case. Morgan shared an excerpt of the SEC’s motion for summary judgment, where it argues that Ripple confirmed the alignment of its interest with that of XRP holders. 

The legal expert added that the SEC will desperately switch to the “fungible argument” if its first argument “does not suffice.” Attorney Morgan shared evidence showing how the SEC argued that “all units of XRP are fungible with each other,” and their prices move simultaneously.

Notably, Ripple’s counsel countered the SEC’s fungible argument in its motion for summary judgment by using gold as an example. 

Doom for Crypto? 

Morgan said if Judge Analisa Torres allows the SEC to get away with equating the common enterprise to common interest, the securities regulator will use the same argument against other crypto assets. 

Per Morgan, the SEC has already started attacking the crypto industry with the fungible argument, as seen in its complaint against crypto exchange Bittrex regarding Algorand (ALGO). 

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Lele Jima
Lele Jima
Lele Jima is a cryptocurrency enthusiast and journalist who is focused on educating people about how the nascent asset class is transforming the world. Aside from cryptocurrency-related activities, Jima is a lover of sports and music.

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