12-24-2020, 07:40 PM
What the Ripple lawsuit could mean for the token and DeFi ecosystem
<!-- SC_OFF --><div class="md"><p>I know most of us like to shit on Ripple for their long-standing hoarding and dumping. That aside, I do not see what makes Ripple fundamentally different from a bunch of other ICO tokens, including but not limited to XLM, ADA, LINK.</p> <p>Whether or not a token issuer is a for-profit or non-profit corporation is irrelevant for the definition of a security according to the Howey Test from what I can tell: <a href="https://www.investopedia.com/terms/h/howey-test.asp">https://www.investopedia.com/terms/h/howey-test.asp</a></p> <p>What matters is whether or not the "investors" are partaking in a speculative enterprise, and that is undoubtedly true for these tokens.</p> <p>Looking at the SEC press statement, all of the charges brought forth could equally be applied to other ICO token and issuers:</p> <blockquote> <p>According to the SEC's complaint, Ripple; Christian Larsen, the company's co-founder, executive chairman of its board, and former CEO; and Bradley Garlinghouse, the company's current CEO, raised capital to finance the company's business. The complaint alleges that Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide. Ripple also allegedly distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services. According to the complaint, in addition to structuring and promoting the XRP sales used to finance the company's business, Larsen and Garlinghouse also effected personal unregistered sales of XRP totaling approximately $600 million. The complaint alleges that the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws.</p> </blockquote> <p>Source: <a href="https://www.sec.gov/news/press-release/2020-338">https://www.sec.gov/news/press-release/2020-338</a></p> <p>Raising funds through the sale of tokens is common practice in the crypto space, that's what ICOs are. So it boils down to the question whether a token is a security under the Howey Test.</p> <p>If XRP is a security, then why aren't XLM, ADA, or LINK?</p> <p>So let's say Ripple loses the lawsuit. I fear this would have a disastrous effect on the entire token and DeFi ecosystem in the US. It would be impossible to trade and transact using anything other than mined coins such as BTC and ETH.</p> <p>Someone please correct me, because I certainly don't like that prospect.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/SaneLad"> /u/SaneLad </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/kj70p5/what_the_ripple_lawsuit_could_mean_for_the_token/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/kj70p5/what_the_ripple_lawsuit_could_mean_for_the_token/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>I know most of us like to shit on Ripple for their long-standing hoarding and dumping. That aside, I do not see what makes Ripple fundamentally different from a bunch of other ICO tokens, including but not limited to XLM, ADA, LINK.</p> <p>Whether or not a token issuer is a for-profit or non-profit corporation is irrelevant for the definition of a security according to the Howey Test from what I can tell: <a href="https://www.investopedia.com/terms/h/howey-test.asp">https://www.investopedia.com/terms/h/howey-test.asp</a></p> <p>What matters is whether or not the "investors" are partaking in a speculative enterprise, and that is undoubtedly true for these tokens.</p> <p>Looking at the SEC press statement, all of the charges brought forth could equally be applied to other ICO token and issuers:</p> <blockquote> <p>According to the SEC's complaint, Ripple; Christian Larsen, the company's co-founder, executive chairman of its board, and former CEO; and Bradley Garlinghouse, the company's current CEO, raised capital to finance the company's business. The complaint alleges that Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide. Ripple also allegedly distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services. According to the complaint, in addition to structuring and promoting the XRP sales used to finance the company's business, Larsen and Garlinghouse also effected personal unregistered sales of XRP totaling approximately $600 million. The complaint alleges that the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws.</p> </blockquote> <p>Source: <a href="https://www.sec.gov/news/press-release/2020-338">https://www.sec.gov/news/press-release/2020-338</a></p> <p>Raising funds through the sale of tokens is common practice in the crypto space, that's what ICOs are. So it boils down to the question whether a token is a security under the Howey Test.</p> <p>If XRP is a security, then why aren't XLM, ADA, or LINK?</p> <p>So let's say Ripple loses the lawsuit. I fear this would have a disastrous effect on the entire token and DeFi ecosystem in the US. It would be impossible to trade and transact using anything other than mined coins such as BTC and ETH.</p> <p>Someone please correct me, because I certainly don't like that prospect.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/SaneLad"> /u/SaneLad </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/kj70p5/what_the_ripple_lawsuit_could_mean_for_the_token/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/kj70p5/what_the_ripple_lawsuit_could_mean_for_the_token/">[comments]</a></span>Kind Regards R