Ripple vs. SEC Lawsuit: US Regulator’s Assertion on XRP’s Intrinsic Value Sparks Controversy In Crypto Community

Key Takeaways

  • XRP community disputes SEC’s claim on the intrinsic value of XRP, alleging reputation smear.
  • Expert Bill Morgan: SEC’s stance reflects misunderstanding or intent to hamper Ripple.
  • SEC’s XRP assertion affects investors’ views negatively across tokens.
Ripple vs. SEC Lawsuit: US Regulator's Assertion on XRP's Intrinsic Value Sparks Controversy In Crypto Community

LUCKNOW (CoinChapter.com) — In the ongoing legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC), the XRP community is disputing the regulatory body’s claim that XRP, the native token of Ripple, holds no value.

Some community members even believe that the SEC’s intention behind this assertion is to tarnish the reputation of XRP. 

Is the SEC’s Motive to Tarnish XRP?

Prominent pro-XRP legal expert Bill Morga has sharply criticized the SEC’s stance, deeming it “negative and reactionary.” Morgan believes that the SEC either misunderstands XRP’s nature or deliberately aims to impede Ripple’s progress as a decentralized payment solution.

The SEC’s assertion initially came to light in its memorandum of law opposing Ripple’s motion for summary judgment. Moreover, the regulatory body contended that XRP lacked intrinsic value, directly challenging Ripple’s two arguments in its summary judgment brief.

Ripple’s argument that XRP purchases were made as payments rather than investments was met with skepticism by the SEC. In response, Morgan explained that the SEC seemingly “perceived” Ripple’s intention to liken XRP’s purchase to commodities like gold, thus sidestepping the notion of it being an investment of funds.

Countering Ripple’s stance, the SEC contended that assets such as gold, despite their intrinsic value, can still be sold as investment contracts.

SEC’s Counterargument on Common Enterprise

In response to Ripple’s argument based on “common enterprise” as a criterion for an asset to be classified as a security, the SEC emphasized that the critical factor is whether an asset was marketed and sold as an investment or a regular asset.

The regulator reiterated that sales of assets, irrespective of their intrinsic value, could still qualify as investment contracts.

Morgan observed that Judge Torres’ apparent classification of digital assets alongside commodities in her verdict possibly irked the SEC. Consequently, the Commission underscored XRP’s lack of intrinsic value in its motion to seek permission for an interlocutory appeal.

Morgan Assertion Got Support From Prominent Personalities

Morgan elaborated that the SEC’s assertion regarding XRP’s absence of intrinsic value could be a strategic move to encourage token issuers to establish utility for their tokens. This maneuver could satisfy the third prong of the Howey test, implying that investors rely on issuers’ efforts to enhance the token’s value.

The Howey Test states, “The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test is satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value.”

US Crypto-Law founder John Deato criticized the SEC for neglecting its goals and objectives. He asked the SEC to reread the Howey Test following its assertion that XRP holds no intrinsic value. 

Ripple, Ripple vs. SEC Lawsuit: US Regulator’s Assertion on XRP’s Intrinsic Value Sparks Controversy In Crypto Community

Attorney Deaton’s comment followed Bill Morgan’s criticism of the SEC for claiming that XRP has no inherent value.

Morgan noted that sellers usually do not create the SEC’s attempt to differentiate XRP from commodities. This move arises from the assertion that XRP lacks intrinsic value at creation. This argument, if upheld, could have broader implications for all crypto tokens.

By adopting this stance, the SEC potentially aims to portray cryptocurrency tokens as an asset class devoid of intrinsic value. This could discourage potential investors from considering these digital assets as viable purchases.

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