In a recent discussion pertaining to the Ripple vs. SEC legal battle, attorney Morgan shares insight on how XRP itself cannot be considered a security.
Attorney Bill Morgan, a notable Australian-based lawyer and commercial litigation specialist, has highlighted a major contributing factor to the argument that XRP should not be classified as a security.
In a tweet yesterday, attorney Morgan explained that if U.S. District Judge Analisa Torres rules that Ripple’s XRP sales to On-Demand Liquidity (ODL) clients are not investment contracts, it will help clarify that XRP itself is not a security.
4) the position in other jurisdictions, if Judge Torres found that sales to ODL customers are not investment contracts (not an investment, no expectation of profit, immediate use of the XRP etc) which would make it clear once and for all that XRP itself is not a security /2
— bill morgan (@Belisarius2020) May 22, 2023
“If Judge Torres found that sales to ODL customers are not investment contracts (not an investment, no expectation of profit, immediate use of the XRP, etc.) which would make it clear once and for all that XRP itself is not a security,” said Morgan.
Ripple to Win and Lose SEC Lawsuit
The pro-XRP lawyer made the assertions in response to a Twitter thread by Jesse Hynes, the founder of SeedStarter. In the thread, Hynes speculated that Ripple would be found guilty of violating United States securities laws through to its early sales of XRP.
However, he further asserted that the court would also rule that the blockchain company is no longer violating these securities laws due to its current approach at XRP sales. For context, Ripple has been selling XRP exclusively to ODL clients since the SEC lawsuit commenced.
According to Hynes, the main question is whether Judge Torres will rule on whether XRP is a security. He noted that the SEC has been using its recent claims to compel the judge into declaring XRP a security.
Hynes said if Judge Torres comments on the legal status of XRP, she will likely conclude that the sixth-largest cryptocurrency by market cap is not an “investment contract.”
If the court does opine on the status of XRP going forward, which I am about 50/50 on whether they will or won’t, the only logical conclusion is that XRP itself cannot be an investment contract. It just doesn’t make sense.
— Jesse Hynes 🌱 (@jesse_hynes) May 22, 2023
Morgan Says Tokens Can Lose Their Security Status
Morgan, commenting on this development, asserted that Hynes’ analysis demonstrates how a digital asset can transition from being classified as a security to not being one. According to Morgan, for a crypto asset to lose its security status, it must align more closely with four key factors: economic reality, technology, the law, and its legal classification in other jurisdictions.
Morgan’s remark syncs with his previous assertions that XRP cannot be a security. As reported earlier by The Crypto Basic, Morgan noted that XRP cannot be considered a security due to Ripple’s transitioning from programmatic and institutional sales of XRP to sales specifically to ODL clients.
According to Morgan, XRP use in ODL does not satisfy any of the elements of the Howey Test, thus implying that Ripple’s XRP sales to ODL customers do not constitute an investment contract. Hence, XRP cannot be considered a security.