XRP, currently the seventh largest cryptocurrency by market capitalization, has experienced a notable increase in trading volumes over the past 24 hours, rising more than 40%. This uptick in trading follows another update regarding the Ripple-SEC lawsuit, which is currently in the appeals phase.
Just last week, the SEC announced that it would file its key brief in the ongoing appeals process by January 15, 2025. While this is happening, there are ongoing discussions about XRP status by the legal community. Here’s what the lawyers have to say about the whole speculation.
XRP’s ranking horror continues
Currently, XRP is passing the final stages of a legal battle over its classification as a security product, with attorney Bill Morgan and social media users Joe Sho and James Farrell weighing in on the topic. Bill Morgan, known for his critical stance on the SEC’s arguments, refutes a claim by Joe Sho, which suggests the Court of Appeals could label XRP as a security.
Joe Sho argues that an appeals court review, or “de novo” review, ignores previous findings and could interpret XRP as an investment contract, in line with other crypto cases, such as Judge Rakoff’s recent ruling in the Terra- case.
Embodiment Theory vs. SEC Argument
Morgan’s approach is more advanced than the random theory circulating in the crypto space, focusing on ’embodiment theory’ and the idea of XRP as an asset rather than a security. He argues that Judge Torres’ ruling, which found that XRP itself is not inherently an investment contract, was appropriate because it distinguished between the asset and the transaction context.
He sees this approach as more coherent, even if it differs from crypto case law or the SEC’s position. The SEC, he notes, continues to argue that XRP’s lack of inherent value means that every transaction involving XRP is an investment contract, especially in the context of Ripple and possibly even broader secondary markets.
Implications of the Court of Appeal’s review
James Farrell adds to the complexity by noting that a “de novo” assessment allows the Court of Appeal to adopt the “embodiment theory” or completely reinterpret the classification of XRP. This means that the court could follow Judge Rakoff’s example from the Terra case, which considered assets such as UST and LUNA as securities based on their use in investment contexts, challenging the initial district decision on XRP.
While Morgan recognizes the Court of Appeal’s discretion to revalue, he believes that any shift to considering XRP itself as a security would misinterpret the judge’s emphasis on the distinction between assets and transactions.
The outcome of this debate could set an important precedent for XRP and other cryptocurrencies, as it questions whether digital assets are inherently securities or only become so within specific transaction contexts. Are we moving in circles?