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HomeCrypto NewsMarketRipple CTO Says An Asset Doesn't Become A Security Because It Was Sold As One

Ripple CTO Says An Asset Doesn’t Become A Security Because It Was Sold As One


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Ripple CTO David Schwartz says an asset itself does not become a security despite being offered and sold as an investment contract. 

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There have been a series of debates since Judge Analisa Torres issued her decision in the SEC v. Ripple case. Recall that she declared that Ripple’s institutional sales of XRP constitute securities because institutional investors expected profit from the company. 

However, she ordered that programmatic sales of XRP on secondary markets are not securities, as retail investors have different expectations. 

In the latest round of debate, Ripple CTO David Schwartz clarified that an asset does not become a security simply because it was initially sold as an investment contract. 

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During the debate, co-founder and CEO of Enumma David Barrera argued that a person buying a token in a secondary market may have reasons to expect profit from the token’s promoters.

However, Schwartz disagreed with Barrera, saying he made a false claim. He said the SEC’s legal theory in the Bittrex case, as seen in a document shared by Attorney Bill Morgan, is incoherent. In the document, the SEC noted that Bittrex offered and sold crypto assets alleged to be securities. 

Reacting to the claim, Ripple’s CTO said: 

“[…] That something was sold as a security doesn’t make it one.” 

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Selling An Itself Asset Without Its Contractual Rights Isn’t A Security 

In response to Schwartz’s comment, an X user Jason Coombs pointed out that Howey did not sell orange groves but trees planted in rows. Coombs added that Howey sold matured trees at higher prices while apportioning a share of the profit to investors based on their “size and class.”

Furthermore, Coombs said the Supreme Court in Howey found that a row of trees was an investment contract scheme containing an essential ingredient- a share of the common enterprise. 

“ANYONE reselling Howey Trees would be reselling securities, each Row being ownable + accessible only via Howey,” Coombs added

Responding, Schwartz noted that a secondary market transaction would be deemed a security when people are reselling Howey trees and transferring the scheme’s contractual rights and obligations.  

“If they just sold the trees carrying no rights or obligations to or from Howey, they would not be selling a security,” he added. 

Schwartz asserted that an asset does not become a security simply because it was offered and sold as an investment contract. 

Pro-XRP lawyer John Deaton holds this same sentiment. Deaton noted that Ripple might have sold XRP in a security offering in the past. However, the attorney has vehemently argued that that does not make XRP in itself a security.

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Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.



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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