In today’s episode of Adam Talks, Adam Bergman, Esq. discusses XRP’s partial victory over the SEC arguing that XRP is not a security or investment contract when consumers purchase it on an exchange.
SEC XRP Shocking Win against the SEC and the Impact on Your Self-Directed IRA.
In this episode of Adam Talks, tax attorney Adam Bergman discusses a recent Court ruling regarding the cryptocurrency XRP and its classification as a security. The court ruled in favor of XRP, stating that it is not a security or investment contract. This is seen as a significant victory for XRP and a loss for the SEC. The Court did determine that the sale of XRP to institutional investors was still considered an investment contract, but not the purchase of XRP by consumers on crypto exchanges. Bergman expresses surprise at the ruling and admits to previously believing that XRP would be deemed a security. He also mentions that the SEC may appeal the decision.
Bergman shares some facts about XRP and its relationship with Ripple, the enterprise parent. Ripple’s mission is to facilitate value transfers across the internet, particularly in international payments. Some of Ripple’s products and services rely on the XRP Ledger, which is an open-source software that requires XRP to operate. Ripple sold XRP to institutional buyers as well as on digital asset exchanges through blind bidder transactions. The Court found that the institutional sales were investment contracts, but the programmatic sales on digital exchanges were not. This distinction was key in determining whether XRP satisfied the Howey test, which defines what a security is.
Bergman expresses his disagreement with the Court’s reasoning, particularly regarding the lack of knowledge about the Ripple connection in programmatic sales. He questions whether buyers are truly unaware of the relationship between XRP and Ripple. However, the Court believed that because buyers and sellers did not know each other in programmatic sales, there was no expectation of profit based on the entrepreneurial or managerial efforts of others. Bergman concludes by mentioning the importance of the Howey test, which has three prongs, and states that satisfying all three would classify XRP as a security.
Overall, this episode highlights the surprising victory of XRP over the SEC in the Court ruling, with XRP being deemed not a security. It discusses the relationship between XRP and Ripple, as well as the distinction made by the Court between institutional sales and programmatic sales. Bergman expresses his initial skepticism about the outcome and his disagreement with the Court’s reasoning. The Howey test is also mentioned as a determining factor in classifying XRP as a security.
Bergman discusses the potential impact on other cryptocurrencies, such as Ethereum, noting that if XRP fails the third prong of the Howey test, other tokens based on smart contracts may also be affected. However, he questions whether the SEC has jurisdiction over secondary sales where buyers and sellers on exchanges do not know each other.
The ruling raises questions about the SEC’s power and jurisdiction over cryptocurrencies. Bergman expresses his concerns about the SEC’s actions and advocates for better regulation and auditing of exchanges to ensure market integrity. He discusses the potential impact of the ruling on the SEC’s future cases involving different types of cryptocurrencies, suggesting that the SEC may struggle to win cases against more decentralized cryptocurrencies like Ethereum. Overall, Bergman views the ruling as a significant loss for the SEC and a significant victory for Ripple.
Bergman also discusses the potential implications for the crypto industry as a whole, noting that the ruling is a win for the industry after facing difficulties in the past year. However, he believes that the Court’s decision is ripe for appeal, and other jurors may find XRP to be a security. Bergman emphasizes the need for the SEC to reassess their approach and suggest that this ruling may hinder their chances of success in future cases.
To learn more, be sure to listen to the whole podcast!
