XRP rallied more than 6% in the past 24 hours to a high of $0.546 before falling back to current levels.
The price surge comes after Ripple responded to an additional authorization letter from the U.S. Securities and Exchange Commission (SEC) regarding its motion for summary judgment.
Ripple attorney Michael K. Kellogg countered in an April 13 letter that the SEC’s arguments in the Commonwealth case do not apply to legal disputes between cryptocurrency companies and financial regulators.
The SEC previously wrote that its enforcement action against investment firm Commonwealth Equity Services provides the court with additional power to deny Ripple’s request for fair notice protections.
Kellogg said the federal case is “a non-public opinion in the district court.” Ripple’s lawyers further argued that the case lacks contemporary evidence to support the defense.
“Reasonable market participants attempting to understand what the SEC permits or prohibits, conclude that defendant’s offer and sale of XRP is not an ‘investment contract,'” Ripple’s attorneys noted, telling the SEC.
“There is also ample evidence that the SEC is not only aware of widespread regulatory confusion, but also exacerbates it by repeatedly issuing (and subsequently denying) otherwise ambiguous guidance. Test with Howey.”
He concluded that the SEC’s argument that it had “successive district court decisions denying fair notice protections” was irrelevant to their case because “the court refused to remove” the regulator’s reliance on them.
Ripple does not sell securities
In a string of tweets, Ripple’s pro-Ripple lawyer Jeremy Hogan offered a compelling reason why he doesn’t think Ripple will sell XRP as a security: a lot of evidence that XRP buyers don’t rely on Ripple’s strength.
Hogan shared a screenshot of one of Judge Torres’ decisions, offering clues as to how she feels XRP was not “properly” sold as a security.
The second biggest reason why Ripple is not selling XRP as a “security.” (small thread)
Judge Torres’ recent opinion provides a clue as to how she (correctly) found that Ripple was not sold as a security.
First, look at the version of Howey’s test she cites: pic.twitter.com/QzVwRekxve
— Jeremy Hogan (@attorneyjeremy1) April 14, 2023
Torres addressed in the case the question of whether the defendants offered to sell or sell XRP as a security. Specifically, the SEC alleges that the defendants sold XRP as an “investment contract,” meaning a security as defined by the securities laws, the filing added.
Ripple, on the other hand, argues that it does not sell XRP as an investment contract and therefore does not require registration. To explain the “test” of an investment contract in one sentence, three aspects of the Howey test are listed:
“The Supreme Court held that the test for an investment contract under the Securities Act is whether the scheme involves 1. investment funds; 2. joint operations; and 3. profits derived solely from the efforts of others.
To argue Part 3 of the Howey test, the SEC used expert witnesses.
However, the testimony of SEC expert “Witness No. 1” was dismissed because he failed to demonstrate that the six factors he listed were important to reasonable XRP buyers.
The judge added that he did not cite sources supporting the measurement of XRP buyer perceptions or behavior. Finally, the SEC expert admitted at the time of the deposit that he did not speak to any XRP buyers while preparing the report.
The SEC has only one expert witness who will testify in part 3 of the Howey test, claiming that Ripple manipulated the price of XRP.
The SEC released a “noise” of various statements made by Ripple as evidence in Part 3, including marketing materials, tweets, and claims that XRP’s price increase was “Ripplemania.”
According to Hogan, there is still no evidence that XRP buyers have seen the “noise” of these claims influence their decisions.
The questions in the test were what XRP buyers thought or knew when buying XRP.
Ripple has witnesses that XRP is publicly viewed as a currency and asset (rather than a security), and thousands of XRP holders are represented in a friend-of-the-court brief.
Finally, the SEC expert acknowledged that most of XRP’s price movement since 2018 has nothing to do with any of Ripple’s actions.
Hogan concluded that Ripple would prevail in the SEC case given the little evidence that XRP buyers do not rely on Ripple’s efforts.
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