Debunking the SEC’s Claims: Why XRP is Not a Security According to Lawyer Jeremy Hogan

The United States Securities and Exchange Commission (SEC) has been embroiled in a legal battle with Ripple, the company behind the XRP cryptocurrency. The SEC alleges that XRP is an unregistered security, but prominent lawyer Jeremy Hogan disagrees. We delve into Hogan’s arguments for why XRP doesn’t fit the definition of a security and explore the implications of this ongoing case.

Understanding XRP and the “Investment Contract” Argument

According to Jeremy Hogan, a partner at Hogan & Hogan law firm, Ripple’s XRP doesn’t fit the legislative definition of a security, specifically an “investment contract.” 

In a series of tweets on April 9, Hogan outlined his thoughts on why XRP could only be considered a security under the “investment contract” category. He clarified that XRP doesn’t align with other security definitions, such as stocks or bonds.

However, Hogan contends that the SEC has failed to prove the existence of an implied or explicit investment contract in its lawsuit against Ripple. He argues that the SEC’s reliance on the purchase agreement is insufficient to establish XRP as an “investment contract.”

Hogan points out that the SEC’s argument essentially strips the “investment” from the “contract,” rendering it just an investment. He compares it to buying an ounce of gold, where Ripple is not obligated to do anything except transfer the asset. This distinction is crucial, as it undermines the SEC’s classification of XRP as an “investment contract.”

The Howey Test and “Blue Sky” Cases

Ripple has long maintained that XRP doesn’t constitute an investment contract under the Howey test. That is a legal framework established by the U.S. Supreme Court in 1946 to determine if a transaction qualifies as an investment contract. 

Hogan supports this claim by examining the “blue sky” cases that the Howey case relies upon for defining an “investment contract.” He asserts that all these cases involve some form of a contract regarding the investment, which is absent in the XRP scenario.

Hogan questions the premise of “reasonable reliance” on an offeror to make a profit when there is no legal recourse if the offeror fails to deliver. He concludes that even the four-part test in the Howey case implies that a “contract” is required.

The Crux of the Issue: Proving an Implied or Explicit Contract for XRP

Hogan emphasizes that the central issue isn’t whether Ripple used funds from XRP sales to finance its business operations. Rather, the question is if the SEC can demonstrate an implied or explicit “contract” between Ripple and XRP purchasers regarding their “investment.” He boldly asserts that no such contract exists.

Although Hogan’s analysis doesn’t prove that the SEC is mistaken in its pursuit of Ripple, it does cast a different light on the ongoing investigation. Ultimately, interpreting these legal arguments will play a significant role in the outcome of this high-stakes case.

Conclusion

As the legal battle between the SEC and Ripple continues, whether XRP is a security remains unresolved. However, Jeremy Hogan’s perspective offers a compelling counterargument to the SEC’s claims. 

While the final decision rests with the courts, Hogan’s insights provide valuable context for understanding the complexities of this groundbreaking case.

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