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Ripple Avoids Securities Question in Motion to Dismiss XRP Lawsuit

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17 hours ago, codiusrex said:

Ripple laid it down for the XRP Community; that buying their asset (the same that they sell for the lion’s share of Ripple’s annual revenue) is not an investment in Ripple.

talking season 3 GIF

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"No Common Enterprise"

This is Black on White what Ripple is saying: Ripple is a project that is financed by selling an asset (digital) to the public to finance its operation, but who's future revenue will not go back to those who funded it. Brilliant. 

So, if you expect XRP to go up, it does not depend on the Ripple's partnerships, projects or any variable of succes, rather it relies on the next fool theory.  Good luck to us all. 

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McDonald's is a project that is financed by selling an asset (cow meat) to the public to finance its operation, but who's future revenue will not go back to those who funded it.  Same with automobiles, flatscreen tv's, and trees one plants in the yard with the expectation that the property will increase in value.  Evidently all these must be brilliant dodges of the security issue as well. 

The SEC has already been extremely clear on what shares of a company, and securities are.  Stated many times on this forum with relevant links.

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9 hours ago, Sporticus said:

They have chosen to continue opaqueness over  transparency, to manipulate market perceptions, and to make self-serving statements that XRP is not a security, when that fact is not known because a court has not ruled on it definitively,  and any such self-serving assertions of Ripple  are misleading per se. 

No court has ruled on bananas being securities, yet they are sold as bananas everywhere. Is that misleading too?

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10 hours ago, Sporticus said:

The U.S. Treasury and Dep't of Justice are not the agencies which are responsible for the regulation of   securities within the United States.  XRP can be both a convertible virtual currency and a security. The two are not mutually exclusive, and are referential of separate legal definitions and under different jurisdictions: FinCEN for currency matters and SEC for securities. 

The Securities Exchange Act of 1934 (SEA) was created to govern securities transactions on the secondary market, after issue, ensuring greater financial transparency and accuracy and less fraud or manipulation. The SEA authorized the formation of the Securities and Exchange Commission (SEC), the regulatory arm of the SEA. 

The SEC is the agency with jurisdiction over securities interpretations and enforcement within the United States.

 

The precedent setting case on how the SEC will determine if an offered asset is  a security was determined by the U.S. Supreme Court.The Howey Test refers to a 1946 case which reached the Supreme Court, SEC v. W.J. Howey Co., a lawsuit involving the Howey Company of Florida.

From the perspective of the Howey Test, the operative question, in this case, is whether or not cryptocurrency investors are participating in a speculative enterprise, and if so, if the profits those investors are hoping for are entirely dependent upon the work of a third party. (investopedia)

Relying on the Howie Test, the  most definitive position on cryptocurrencies and securities characterization which the SEC has announced is the Turnkey Jet No Action position.  The procedure to determine whether or not an offering is not violative of the  SEA is to petition the SEC for a no action position. Ripple could easily settle the issue responsibly and lay to rest  the uncertainty they have created by their continuing to sell XRP to fund their operations.   

But they have chosen their  profits over ethics. 

They have chosen to continue opaqueness over  transparency, to manipulate market perceptions, and to make self-serving statements that XRP is not a security, when that fact is not known because a court has not ruled on it definitively,  and any such self-serving assertions of Ripple  are misleading per se. 

This is the rule in the US announced by the lawful authority on point, the SEC,  concerning  what is or is not a crypto-security.

 SEC TURNKEY JET MEMO

Securities Act of 1933
Section 2(a)(1)

April 3, 2019

Response of the Division of Corporation Finance

Re:

TurnKey Jet, Inc.
Incoming letter dated April 2, 2019

Based on the facts presented, the Division will not recommend enforcement action to the Commission if, in reliance on your opinion as counsel that the Tokens are not securities, TKJ offers and sells the Tokens without registration under the Securities Act and the Exchange Act. Capitalized terms have the same meanings as defined in your letter.

In reaching this position, we particularly note that:

TKJ will not use any funds from Token sales to develop the TKJ Platform, Network, or App, and each of these will be fully developed and operational at the time any Tokens are sold;
 

the Tokens will be immediately usable for their intended functionality (purchasing air charter services) at the time they are sold;
 

TKJ will restrict transfers of Tokens to TKJ Wallets only, and not to wallets external to the Platform;
 

TKJ will sell Tokens at a price of one USD per Token throughout the life of the Program, and each Token will represent a TKJ obligation to supply air charter services at a value of one USD per Token;
 

If TKJ offers to repurchase Tokens, it will only do so at a discount to the face value of the Tokens (one USD per Token) that the holder seeks to resell to TKJ, unless a court within the United States orders TKJ to liquidate the Tokens; and
 

The Token is marketed in a manner that emphasizes the functionality of the Token, and not the potential for the increase in the market value of the Token.

This position is based on the representations made to the Division in your letter. Any different facts or conditions might require the Division to reach a different conclusion. Further, this response expresses the Division's position on enforcement action only and does not express any legal conclusion on the question presented.

Sincerely,

Jonathan A. Ingram
Chief Legal Advisor, FinHub
Division of Corporation Finance

 

Ripple denying any securities status is deceitful, because third parties, like those of you who are lay persons, unlettered and foolishly hodlers in this chat space rely on that assertion and buy XRP in the market place. You continue to carp and hold forth with your lack of knowledge and induce other ignorant investors to buy XRP.

The determination of whether Ripple is selling a security is unclear and without absolute clarity any Ripple assertion to the contrary is misleading.

The Ripple/XRP  securities  characterization is for the Courts and the SEC to make,  not Ripple. 

 

If Ripple will claim validly that the corporation has  no relationship with XRP, the company board  should lock it all up and seek the interpretation of the SEC.   That Ripple is continuing  to sell XRP in the market place shows a disregard to the interests of XRP investors, the very ones the SEA was designed to protect  and Ripple shows a flagrant disregard for  the rule of law and has no just

claim to social responsibility.. 

 

don't agree with your characterizations and conclusions, but otherwise a very informative post, thank you.

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10 hours ago, Spekul8 said:

"No Common Enterprise"

This is Black on White what Ripple is saying: Ripple is a project that is financed by selling an asset (digital) to the public to finance its operation, but who's future revenue will not go back to those who funded it. Brilliant. 

So, if you expect XRP to go up, it does not depend on the Ripple's partnerships, projects or any variable of succes, rather it relies on the next fool theory.  Good luck to us all. 

You've been around long enough to know damn well its far more nuanced than that.  Ripple INDIRECTLY positively influences mine and your speculative move into XRP through its strategic investments with XRP.  When Ripple hires the top resources in their respective fields with the proceeds of XRP I see a very high likelihood of that resulting in a positive long-term effect on XRP.  Maybe we disagree on that point?  I personally feel that Ripple will do everything they can to drive the successful adoption and global utility of XRP for every possible use-case.  What does that mean for the price of XRP?  I'm speculating it will increase substantially- but far from overnight.  My timeline for a successful partial exit is end of 2024.  The internet of value doesn't exist without a digital asset and it seems to me that XRP is still the best choice to fill that necessary position.  I think Praxxis will be something to watch but its still a long ways out from what I can tell.  

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9 hours ago, xrphilosophy said:

McDonald's is a project that is financed by selling an asset (cow meat) to the public to finance its operation, but who's future revenue will not go back to those who funded it.  Same with automobiles, flatscreen tv's, and trees one plants in the yard with the expectation that the property will increase in value.  Evidently all these must be brilliant dodges of the security issue as well. 

The SEC has already been extremely clear on what shares of a company, and securities are.  Stated many times on this forum with relevant links.

When you walk into a business and purchase goods and services, you do not have expectations of making revenue from these goods and services. Going back to your McDonald's: When you buy a hamburger, you do not expect to earn revenue from the price of Cattle. When you walk into a car dealer and buy a car, you do not expect the value of the vehicle to go up for speculation, and it has a utility (it drives). When you buy a piece of wood for a shelf in Home Depot, you do not expect lumber to go up, and when you buy a TV, you do not expect Plasma prices to go up. 

When people bought XRP, since they can't eat it, drive it, or hang it on the all, what was the expectation? This a moral and ethical issue, not a security versus non-security issue. The SEC is not an ethics committee, but they have the right to ask "what was the expectations" and that I would leave to the legal profession. 
 

 

 

 

 

Edited by Spekul8

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22 minutes ago, Spekul8 said:

 

When people bought XRP, since they can't eat it, drive it, or hang it on the all, what was the expectation? This a moral and ethical issue, not a security versus non-security issue. The SEC is not an ethics committee, but they have the right to ask "what was the expectations" and that I would leave to the legal profession. 
 

 

 

 

 

Sure, I absolutely purchased XRP with the expectation of profit.  But Ripple has a fantastic and correct argument that they never directly suggested this.  All they have been vocal about over the years is driving utility using XRP (because its the obvious choice due to technical superiority but not the ONLY choice).  You and I put 2 and 2 together and speculated that all this utility will result in the price going up.  The fact that this was done indirectly is precisely my point.  Brad can say over and over again on CNBC that the utility of any asset is what will drive long-term value and I'm betting he's correct.  

Edited by aavkk

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"It’s hard to know how a court will rule until we see the response to this motion, but so far Ripple has done pretty well — keeping the case in federal court was slick, procedurally. And whether you are or are not an XRP fan, this motion makes a number of credible substantive arguments that will require skill to defeat. An outright loss for the plaintiffs isn’t out of the realm of possibility, particularly on the federal securities claims."

https://www.theblockcrypto.com/post/40548/ripple-moves-to-dismiss-class-action-complaint-says-claims-are-time-barred

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3 minutes ago, aavkk said:

You've been around long enough to know damn well its far more nuanced than that.  Ripple INDIRECTLY positively influences mine and your speculative move into XRP through its strategic investments with XRP.  When Ripple hires the top resources in their respective fields with the proceeds of XRP I see a very high likelihood of that resulting in a positive long-term effect on XRP.  Maybe we disagree on that point?  I personally feel that Ripple will do everything they can to drive the successful adoption and global utility of XRP for every possible use-case.  What does that mean for the price of XRP?  I'm speculating it will increase substantially- but far from overnight.  My timeline for a successful partial exit is end of 2024.  The internet of value doesn't exist without a digital asset and it seems to me that XRP is still the best choice to fill that necessary position.  I think Praxxis will be something to watch but its still a long ways out from what I can tell.  

The issue is not whether Ripple makes an effort. I have no doubt that they make best efforts to grow their company, and their technology could save companies money.  Also, I am aware that "Rome was not built in a day". 

But, the issue is the mechnism under which Ripple as a digital currency operate under what we call exchanges. So here is the real question for me is this: Can Ripple value increase under the listings of what we call "exchnages"?  What I read from the Ripple report is that their digital asset XRP (although necessary for their operation) has a seperate life of the Ripple operation.  Again, XRP Is used, but it does not have to rise in price, and they "Ripple" have the right to continues selling it that way. 

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17 hours ago, Spekul8 said:

When you walk into a business and purchase goods and services, you do not have expectations of making revenue from these goods and services. Going back to your McDonald's: When you buy a hamburger, you do not expect to earn revenue from the price of Cattle. When you walk into a car dealer and buy a car, you do not expect the value of the vehicle to go up for speculation, and it has a utility (it drives). When you buy a piece of wood for a shelf in Home Depot, you do not expect lumber to go up, and when you buy a TV, you do not expect Plasma prices to go up. 

When people bought XRP, since they can't eat it, drive it, or hang it on the all, what was the expectation? This a moral and ethical issue, not a security versus non-security issue. The SEC is not an ethics committee, but they have the right to ask "what was the expectations" and that I would leave to the legal profession. 
 

 

 

 

 

I appreciate your thoughts. But it is not a moral nor an ethical issue.  It also has utterly nothing to do with the legal profession. The point many are missing is that the SEC has made it abundantly clear time and time and time again that they will not intervene in this market "hampering innovation".  The SEC operates on the basis of what the financial industry tells them to do.  It always has. That's the reality.  It's all who is controlling the message, and they have already come out numerous times and informed the general public that they are "in line" with the financial industry who wants this market to succeed.  So for egregious violations they may make some rulings, but not for any of the front and center companies who are showing their entire hand.  This has been a moot point for almost a year now, but gets more attention than the $589 hype (which I didn't enjoy either, but just my opinion).

The consumer products analogy (McDonald's etc) was just poking fun at all the hype around this issue.  If anyone thinks the SEC is going to come down on the financial industry based upon moral, ethical, or legal issues they may have missed the 2008 financial crisis- the very event which spawned Bitcoin in the first place. Now the financial industry has taken over this entire market (we're cheering for ETF's, the futures market, Baakt, Fidelity, Vanguard, IRA's SBI, Moneygram, on and on and on all to go online), yet there is still talk of XRP, the major connector for value transfer between and for all of these entities having a wet blanket thrown over it by the SEC.  That time passed quite a long time ago- the infrastructure for all these assets, including and especially XRP, would not have been built if it was going to be controversial. The only people who take the "security" concept seriously are the desperate hopefuls who are in court trying to make some lawsuit money for themselves. How much success are they having? Has anything changed for the digital asset market, partnerships, enterprise adoption because of this?  Yes, it's only grown like gang busters.  But folks still bring up this security issue as if it is real.  It's just not, like it or not. And that is the reality of today. I am speaking as one individual here, but this is based on having read everything the SEC has put out on this particular issue.  It's subtle in tone, but extremely clear if you read it.  And it's a bit of research, but well worth going back and doing so.

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21 hours ago, Spekul8 said:

When people bought XRP, since they can't eat it, drive it, or hang it on the all, what was the expectation? This a moral and ethical issue, not a security versus non-security issue. The SEC is not an ethics committee, but they have the right to ask "what was the expectations" and that I would leave to the legal profession. 

 

9 hours ago, Cooliozxrp said:

And people compare buying xrp to buying a big Mac wtf! 

 

12 hours ago, codiusrex said:

Wow. Case closed. 

Here's a more relatable example for you guys:

I prospect for gold and strike upon one of the richest veins in the world.  I partner up with some guys and we divide the claim so that each of us gets 20%, and we assign the rest to our newlyfound mining company.   The company mines gold and sells it to the market.  To improve business, we start a global campaign working with social media influencers to promote gold jewelry and increase demand.   We also work various other angles to try to increase use of gold in the electronics and conductor industries.   At this point, approximately 50% of the estimated gold vein yield has been mined and sold to the market.  The remaining 50% are still controlled by the company and the original founders.

Some buyers purchase gold because they believe it will appreciate in value over time, others buy gold from the secondary markets in the form of gold jewelry because they are swayed by the social media influencers, and yet others buy gold because it has utilitarian value in electronics industry.

Are purchasers of gold unwittingly buying unlicensed gold mine securities?

In case the answer is not clear - gold is a commodity.  So is xrp. 

Case closed.

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