Friday, October 7, 2022

XRP Ecosystem Faces Huge Risk As Ripple Awaits Summary Judgement Result

The fate of the XRP ecosystem now hangs in the balance as the SEC vs Ripple lawsuit finally nears its end. Both parties have already filed motions for Summary Judgement, but there appears to be one final twist in the long legal battle.  

Risk for the XRP ecosystem?

Per the filed documents, SEC and Ripple hold dissenting views about what should be termed as a “common enterprise” and “investment contract.” And that exactly is where the SEC vs Ripple case is focused at the moment.

Ripple is claiming that common interest does not exactly equate to a common enterprise. The firm then claims that the XRP ecosystem is in no way a common enterprise. 

Per SEC’s counterclaim, however, fungible tokens give rise to a common enterprise. The SEC argues that this is because everyone involved holds a common interest in prices going up. Therefore, the XRP ecosystem is, without a doubt, a common enterprise.

Speaking about the situation, John Deaton, Amicus Curiae in the XRP case, has shared why there’s a potential risk for the XRP ecosystem. In a tweet, he mentioned that the SEC had earlier claimed that Ripple itself is the common enterprise. However, Ripple forced the SEC to believe that XRP holders have no legal or financial interest in the firm. Summarily, Ripple claimed that it owes XRP holders nothing.

Conceding to Ripple, the SEC then brought forward new claims that the XRP ecosystem is the common enterprise. Interestingly, the ecosystem includes Ripple, every XRP holder around the world, exchanges, developers and users having access to the XRPL. In short, the ecosystem consists of everything.

Potential impact of the case result

Presently, the SEC claims it isn’t arguing that the XRP itself is a security. However, it also argues that XRP itself represents all of Ripple’s efforts and promises, therefore XRP represents the common enterprise.

But experts like Deaton think otherwise. He says, unlike what the SEC claims, it is ultimately doing exactly what it says it isn’t. That is, the SEC is in fact, arguing that XRP itself is the security.

Whatever might be the case, however, XRP holders globally have seen the amount of danger that this argument poses. And not only XRP holders, but even holders of digital assets everywhere. This is because, if SEC should win this argument, then it may apply to all global securities laws.

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