Enumma Founder Says “XRP Not a Security” Is Misrepresentation of Court’s Ruling, Ripple CTO Reacts

Ripple CTO reacts to a legal analysis by an expert who argued that people are misrepresenting Judge Torres’ ruling regarding the security status of XRP. 

Crypto and legal analysts are providing further insights into Judge Analisa Torres’ ruling in the SEC v. Ripple case. 

People Are Misrepresenting Judge Torres’ Ruling

In a Twitter thread today, David Barrera, co-founder and CEO of Enumma, noted that many people have been misrepresenting Judge Torres’ ruling regarding the security status of XRP. 

“Those who say Judge Torres stated XRP is not itself a security are misunderstanding or misrepresenting what she said,” Barrera noted. 

According to Barrera, the misrepresentation of the ruling stems from the fact that the judge used the word “embodies.” 

Those who say Judge Torres stated XRP is not itself a security are misunderstanding or misrepresenting what she said. Many make big deal of the fact that Judge Torres used the word “embodies.” But let’s look at what Judge Torres actually wrote.

— David Barrera (@david_r_barrera) July 29, 2023

He posted an excerpt of Judge Torres’ ruling about XRP, which reads: “XRP, as a digital token, is not in and of itself ‘a contract, transaction[,] or scheme’ that embodies the Howey requirements of an investment contract.” 

Consequently, Barrera clarified that Judge Torres did not rule that “XRP itself is not a security.” The judge also did not declare that “XRP is not an instrument that embodies an interest in the scheme.”

He asserted that the US District Judge said XRP, in and of itself, is not a scheme that embodies all the requirements of Howey. 

All she said was that XRP, IN AND OF ITSELF (ie, inherently, alone, without more) is not a SCHEME that embodies (ie, contains, meets, satisfies) all the requirements of Howey.

— David Barrera (@david_r_barrera) July 29, 2023

SEC Didn’t Claim XRP Is the Investment Contract

Furthermore, Barrera noted that the SEC never argued that XRP is the entire scheme that constitutes the investment contract. 

Per Barrera, the SEC’s position in the case was that the scheme that embodies all the requirements of Howey is not XRP but all the circumstances surrounding the offering and sale of the coin. 

The SEC’s position is that the scheme that embodies all the requirements of Howey is “not simply the XRP… it is all the facts and circumstances surrounding the digital asset and the manner in which it is offered and sold.”

— David Barrera (@david_r_barrera) July 29, 2023

He added that Judge Torres’ ruling did not answer whether XRP or any digital token embodies an interest in the investment contract. 

“All she said is XRP is not in and of itself a particular type of scheme (a scheme that embodies all the requirements of Howey),” he added. 

Howey Didn’t Address What Constitute Sale of Securities

Additionally, Barrera said the Howey test did not address the question of what constitutes the sale of security. He added that the legal test only focused on what constitutes an investment contract- a type of security. 

Barrera argued that people cannot apply cases that interpret the statutory definition of a security to the interpretation of a sale.   

Ripple CTO Responds 

Interestingly, Barrera’s last remark prompted a reaction from Ripple’s CTO David “JoelKatz” Schwartz. 

In response, Schwartz noted that since the legal definition of a sale contains security in several places, then it is imperative to apply the statutory definition of security to determine a sale. 

To buttress his point, Schwartz shared a screenshot showing the legal definition of a sale. Furthermore, Ripple’s CTO highlighted all the areas containing the word security. 

Since the legal definition of a sale contains the word "security" in it over and over, you not only can apply the statutory definition of security to determine what's a sale, but you absolutely have to. pic.twitter.com/tND6Rj2275

— David "JoelKatz" Schwartz (@JoelKatz) July 29, 2023