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> But Torres ruled Ripple's XRP sales on public cryptocurrency exchanges were not offers of securities under the law, because purchasers did not have a reasonab

> But Torres ruled Ripple's XRP sales on public cryptocurrency exchanges were not offers of securities under the law, because purchasers did not have a reasonable expectation of profit tied to Ripple's efforts. > Those sales were "blind bid/ask transactions," she said, where the buyers "could not have known if their payments of money went to Ripple, or any other seller of XRP." I bet this gets overturned on appeal. It makes no sense to me. Seems like a huge loophole if it stands. Maybe it's explained better in the actual ruling, anyone have a link? Of course you can count on Reuters to never link to important information.

otoburb 3y ago
>>Maybe it's explained better in the actual ruling, anyone have a link? The docket[1] has the ruling[2], but there's very little additional detail provided beyond the focus on "blind transactions" to invalidate one of the Howey prongs[3]. As an aside, thank goodness for Court Listener and the RECAP/PACER archive! [1] https://www.courtlistener.com/docket/19857399/securities-and-exchange-commission-v-ripple-labs-inc/ https://www.courtlistener.com/docket/19857399/securities-and... [2] https://www.courtlistener.com/docket/19857399/874/securities-and-exchange-commission-v-ripple-labs-inc/ https://www.courtlistener.com/docket/19857399/874/securities... [3] https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets https://www.sec.gov/corpfin/framework-investment-contract-an...
chrisco255 3y ago
Not really, unless XRP is a share of a company (it's not) and promises dividends (it doesn't), there's no expectation of profit by purchasers of XRP. Profits from speculation is not the same as profits from business activities. People purchase everything from bar codes (yes, 11 digit bar codes are a commodity with limited supply), to trailers, to collectible video games, to oil and minerals, precious metals, art, antiques, etc etc all on speculation that they'll be worth more in the future.
- modeless 3y ago
  Any speculative profit you hope to make on XRP is entirely reliant on the business of Ripple. They control and run and improve and promote the network, and without those efforts XRP would not have any hope of increasing in value at all. It's plain as day that people purchasing XRP rely on the efforts of Ripple the company for their expectation of profit, regardless of who they purchase the XRP from.
  - mrguyorama 3y ago
    The thought experiment IMO should be simple: How valuable is an XRP token without Ripple as a company?
  - dcolkitt 3y ago
    Any speculative profit you hope to make on buying a limited edition Rolex is entirely reliant on the business of Rolex continuing to market the brand of Rolex. But if you don't have a formal contractual relationship with Rolex SA, then it's quite simply not an investment contract.
    - jakelazaroff 3y ago
      > Any speculative profit you hope to make on buying a limited edition Rolex is entirely reliant on the business of Rolex continuing to market the brand of Rolex. That is not at all true. Rolexes will continue to accrue value even (especially?) if the company goes out of business.
      - scg 3y ago
        To the extent that the Rolex brand has a certain inertia that will propel it further even after the company ceases to exist, that inertia can be attributed to company's previous marketing efforts. Indeed, the brand may retain value for some time even if the company goes out of business, perhaps even for a very long time. Nevertheless, that doesn't negate the fact that ongoing marketing efforts can amplify the brand's value and momentum, and the brand's inertia will be even stronger should the company cease to exist. Another way to look at this is to put yourself in the shoes of a prospective buyer in 1923. Wouldn't you say in that situation you rely on the company's continuing marketing efforts to further the value of the brand? At what point in the last 100 years do you stop relying on the company's efforts? Also, Rolex can easily destroy brand value with ill-considered promotional campaigns, so you rely on the company to not mess it up.
DennisP 3y ago
The judge referenced the Howey case, saying that just because you have an investment contract involving an orange grove, that doesn't mean the orange grove itself is a security. A security is a contract, not just anything that people trade around in a speculative way. William Hinman of the SEC said much the same thing in 2018: https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418
- yata69420 3y ago
  This is pretty obviously the reasonable take. > A security is a contract, not just anything that people trade around in a speculative way. The scary thing IMO is that I think if you had enough big money trading bottlecaps or baseball cards, you'd quickly find them being considered a security. But words have to mean something. Things can't just be a "security" because they make the government feel insecure.
  - DennisP 3y ago
    Enormous money trades soybeans but they still aren't securities.
- pcthrowaway 3y ago
  I wonder if this will have an impact on non-native tokens (which are implemented with smart contracts)

otoburb 3y ago

>>Maybe it's explained better in the actual ruling, anyone have a link? The docket[1] has the ruling[2], but there's very little additional detail provided beyond the focus on "blind transactions" to invalidate one of the Howey prongs[3]. As an aside, thank goodness for Court Listener and the RECAP/PACER archive! [1] https://www.courtlistener.com/docket/19857399/securities-and-exchange-commission-v-ripple-labs-inc/ https://www.courtlistener.com/docket/19857399/securities-and... [2] https://www.courtlistener.com/docket/19857399/874/securities-and-exchange-commission-v-ripple-labs-inc/ https://www.courtlistener.com/docket/19857399/874/securities... [3] https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets https://www.sec.gov/corpfin/framework-investment-contract-an...

chrisco255 3y ago

Not really, unless XRP is a share of a company (it's not) and promises dividends (it doesn't), there's no expectation of profit by purchasers of XRP. Profits from speculation is not the same as profits from business activities. People purchase everything from bar codes (yes, 11 digit bar codes are a commodity with limited supply), to trailers, to collectible video games, to oil and minerals, precious metals, art, antiques, etc etc all on speculation that they'll be worth more in the future.

modeless 3y ago
Any speculative profit you hope to make on XRP is entirely reliant on the business of Ripple. They control and run and improve and promote the network, and without those efforts XRP would not have any hope of increasing in value at all. It's plain as day that people purchasing XRP rely on the efforts of Ripple the company for their expectation of profit, regardless of who they purchase the XRP from.
- mrguyorama 3y ago
  The thought experiment IMO should be simple: How valuable is an XRP token without Ripple as a company?
- dcolkitt 3y ago
  Any speculative profit you hope to make on buying a limited edition Rolex is entirely reliant on the business of Rolex continuing to market the brand of Rolex. But if you don't have a formal contractual relationship with Rolex SA, then it's quite simply not an investment contract.
  - jakelazaroff 3y ago
    > Any speculative profit you hope to make on buying a limited edition Rolex is entirely reliant on the business of Rolex continuing to market the brand of Rolex. That is not at all true. Rolexes will continue to accrue value even (especially?) if the company goes out of business.
    - scg 3y ago
      To the extent that the Rolex brand has a certain inertia that will propel it further even after the company ceases to exist, that inertia can be attributed to company's previous marketing efforts. Indeed, the brand may retain value for some time even if the company goes out of business, perhaps even for a very long time. Nevertheless, that doesn't negate the fact that ongoing marketing efforts can amplify the brand's value and momentum, and the brand's inertia will be even stronger should the company cease to exist. Another way to look at this is to put yourself in the shoes of a prospective buyer in 1923. Wouldn't you say in that situation you rely on the company's continuing marketing efforts to further the value of the brand? At what point in the last 100 years do you stop relying on the company's efforts? Also, Rolex can easily destroy brand value with ill-considered promotional campaigns, so you rely on the company to not mess it up.

DennisP 3y ago

The judge referenced the Howey case, saying that just because you have an investment contract involving an orange grove, that doesn't mean the orange grove itself is a security. A security is a contract, not just anything that people trade around in a speculative way. William Hinman of the SEC said much the same thing in 2018: https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418

yata69420 3y ago
This is pretty obviously the reasonable take. > A security is a contract, not just anything that people trade around in a speculative way. The scary thing IMO is that I think if you had enough big money trading bottlecaps or baseball cards, you'd quickly find them being considered a security. But words have to mean something. Things can't just be a "security" because they make the government feel insecure.
- DennisP 3y ago
  Enormous money trades soybeans but they still aren't securities.
pcthrowaway 3y ago
I wonder if this will have an impact on non-native tokens (which are implemented with smart contracts)