XRP’s Status as a Security: Insights From a Lawyer

Lawyer Jeremy Hogan, an expert in securities law, is making waves in the crypto community with his bold statement: “XRP is not a security!” According to Hogan, the United States Securities and Exchange Commission (SEC) has failed to provide a convincing legal argument to demonstrate that XRP is indeed a security.

Complicated Legal Facts

Hogan’s tweet highlights a critical point: XRP can only POSSIBLY fit under the definition of an “investment contract” based on the legislative definition of security, and that is the news we were expecting as a community. However, it’s not a stock or a bond. Even the SEC concedes this point by using the term “investment contract.” So, the question is, does XRP meet the definition of an investment contract?

The #1 reason why XRP is not a Security (a thread).

First, under the legislative definition of a security, XRP can only POSSIBLY fit under the definition of an "investment contract." It is not a stock or bond, etc..

Even the SEC concedes this: "investment contract." pic.twitter.com/n9g7ZEos2n

— Jeremy Hogan (@attorneyjeremy1) April 9, 2023

The SEC has failed to provide any evidence of an implied or explicit contract of investment in the Ripple case. Instead, the SEC argues that the purchase agreement is sufficient to prove that XRP is a security. 

However, Hogan argues that this logic tears the “investment” from the “contract.” A simple purchase, without more, cannot be an “investment contract,” as there is no obligation for Ripple to do anything except transfer the asset.

The absence of any case authority directly on point has made this issue more complicated. However, all the “blue sky” cases that dictate the definition of “investment contract” had a “contract” regarding the “investment.” The four-part test, which is often quoted, also implies that a “contract” of some sort is required. Therefore, without any contractual obligations, a purchaser cannot “reasonably rely” on an offeror to make them a profit when the offeror fails to come through.

To clarify, the designation “security“ is not meant to protect a would-be investor from making bad decisions. The Securities laws only require offerors to make certain disclosures regarding the contract the purchaser is entering. 

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

The verdict? There was no such contract. So, XRP is not a Security! Hogan’s analysis has set the crypto community buzzing, and it remains to be seen what the SEC will do next. But for now, Hogan’s argument stands strong, and XRP enthusiasts can rest easy knowing that their beloved cryptocurrency is not a security after all.

It’s important to note that Hogan’s opinion is just that: an opinion. The case is still ongoing, and the courts will ultimately decide whether or not XRP is a security. While Hogan’s analysis is compelling, it’s important to wait for a final judgment from the court before drawing any conclusions.

The legal process can be lengthy and complicated, and there’s no telling how long it will take for this case to be resolved.