Veteran lawyer Jeremy Horgan remarked on April 9 that the United States Securities and Exchange Commission (SEC) has failed to justify that XRP is a security as per a tweet.
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
Jeremy Hogan, a partner at the Hogan & Hogan law firm, further argued in a series of tweets, that XRP cannot be considered an “investment contract” because it does not fit the definition of such a contract.
An "investment contract" analysis is governed by the "Howey" case and progeny.
The "test" in the case (investment in a common enterprise with expectation of profits from efforts of others) was in response to a lower court opinion that a "speculative" investment was required. pic.twitter.com/07hOLcp0EC
— Jeremy Hogan (@attorneyjeremy1) April 9, 2023
He also maintained that the SEC has not demonstrated that there was an explicit or implicit contract between Ripple and XRP purchasers regarding their investment.
Hogan’s argument revolved around the fact that XRP does not fit the traditional definitions of securities such as stocks or bonds. He believes that the only legislative definition that XRP could “possibly” fit is that of an investment contract.
However, he established that without an obligation for Ripple to do anything except transfer the asset, XRP cannot be considered an investment contract.
Hogan further stressed that the Howey test used to determine if a transaction qualifies as an investment contract requires a “contract” of some sort. All “blue sky” cases pertaining to the Howey case involved some form of a contract regarding the investment.
Therefore, Hogan claims that the fundamental issue is not whether Ripple used money from the sale of XRP to fund its business, but if the SEC could establish that there was a contract between Ripple and XRP purchasers regarding their investment.
Recall that the SEC instituted a lawsuit against Ripple’s XRP in Dec. 2020, claiming that the company had illegally sold XRP as an unregistered security.
Meanwhile, Ripple has consistently disputed the SEC’s claim, arguing that it does not constitute an investment contract under the Howey test.
Assessing Hogan’s Premises
Jeremy Hogan’s premises cannot be randomly dismissed because it highlights complexities that revolve around classifying cryptocurrencies as securities.
Meanwhile, Hogan’s argument supporting Ripple’s claim could potentially be a game-changer in the ongoing legal battle between Ripple and the SEC.
Cryptocurrencies are a relatively new asset class, and the traditional definitions of securities do not always fit them.
More than any time, investors believed that the ongoing legal battle between Ripple and SEC will eventually be in favour of the former.
This subsequently led to the rise of XRP investors, thereby pushing up the token price by more than 15% in March, 2023. At the time of writing, XRP is trading at $0.5 according to CoinMarketCap data.
