Thought Exercise: Is FXRP a Security?

[brianwalden 4,374]

Assume, hypothetically, that XRP is a security. Is FXRP, a coin on the Flare Network that's pegged to the price of XRP but backed entirely by FLR, therefore also a security?

[RobertHarpool 1,103]

What this SEC experience has taught me is that you can stretch the Howey Test blanket around about anything. I invested money in Chevy when I bought a '69 Camero with the expectation it will increase in value though no effort of my own. My wife has a few high-end purses doing the same thing. Sadly, I've got a house full of losing securities too. What's a man to do with all these Chia Pets? 

To your question ... with history as a precedent, the only way to find out is to get some and then wait 10 years for the SEC to 'clarify' the matter. 

(sorry, feeling a bit cheeky today) 

[KarmaCoverage 4,494]

Welp, this is a brain bender. I'd guess that it'd be a derivative of some type.

Maybe it's a derivative, of a security, of a digital asset, for an investment contract?

[wogojump 378]

This is what I have been looking to better understand.  I believe by default no.  At least based on current laws and with out additional legal/lawsuits being applied.  If Ripple started going out of their way to move their funds through the FXRP mint process, I am sure the SEC would then monitor them for potentially violating investment contract laws.

[paym8 138]

I think, even if spark tokens are not securities them selves, what you do with them & the things built on and around flare are likely to be dragged into the securities regulations, looking at Genslers ideas of regulating crypto. yes I have read that lengthy presentation.

minting, staking, yield farming, lending, insurance, liquidity pooling for rewards, being the first projects to be applied will certainly put them on the radar.

Will simply delegating tokens for expected reward, to FTSO signal providers, constitute a security contract withthe entity?

will being an agent for minting FXRP?

Just as XRP itself may not be a security, how its packaged up into products and contracts could very well be, flare spark or FLA will be no different, especially the investing staking risk for reward in third party products. 

the contingency plan should be in place.

I can see Gensler requiring regstration for many crypto entities going forward.

[Gepster 603]

16 hours ago, paym8 said:

I can see Gensler requiring regstration for many crypto entities going forward.

That's fine as long as this is applied consistently throughout the space.  If all have to jump through the same (US) hoops, that's advantageous for Ripple and my security tokens.

[thinlyspread 3,487]

21 hours ago, brianwalden said:

Assume, hypothetically, that XRP is a security. Is FXRP, a coin on the Flare Network that's pegged to the price of XRP but backed entirely by FLR, therefore also a security?

It would likely make providing such services on Flare illegal in the same way you cannot offer stocks (equity securities) without being a licenced broker/dealer etc. 

Remember, FXRP is still a "claim" on the underlying asset, XRP. 

Edited March 3 by thinlyspread