XRP: Security or Not a Security, That Is the Question: Insights from a Prominent Attorney

Jesse Hynes, a prominent American lawyer, provides his expert perspective on the SEC’s ongoing lawsuit against Ripple Labs and the future of XRP.

Hynes, an established American attorney and Chief Legal Officer at Gala Games, recently took to Twitter to weigh in on the ongoing lawsuit against Ripple Labs initiated by the U.S. Securities and Exchange Commission (SEC) in December 2020. This case centers around allegations of illegal sales of XRP tokens, which the SEC tends to regard as security, much like most other crypto tokens.

On May 22, 2023, Hynes posted a series of tweets sharing his predictions about the potential verdicts of the case. Beginning with the consideration of XRP’s early-day sales, he postulated that they might be deemed as violations of securities laws. This decision, he believes, could pave the way for the SEC to take similar action against numerous other firms engaged in fundraising via sales, which, according to his interpretation, equates to the creation of an investment contract.

Despite these alleged early infringements, Hynes expressed a belief that Ripple’s current sales practices could be adjudged as compliant with securities laws by the court. In his view, a key issue is whether XRP itself falls within the definition of a security, especially given its history of sales that may be characterized as securities.

Hynes also raised concerns that the court may refrain from addressing this pivotal question, which, in his estimation, could complicate the case resolution. However, he also recognized that the SEC’s recent actions and claims could potentially influence the court to reach a decision on this matter. If this were to happen, Hynes indicated that he would view the SEC’s insistence on this point as instrumental in compelling the court to provide clarity.

When contemplating the court’s stance on XRP’s status moving forward, Hynes held a 50/50 view on whether the court would make a determination. If the court were to delve into this issue, he argued that the only rational conclusion would be that XRP does not fit the mold of an investment contract.

He further speculated that Ripple’s “fair notice” defense could become relevant if the court unexpectedly determined that XRP, as an asset, is an investment contract. In such a scenario, Ripple could legitimately claim that it was not given adequate warning of this interpretation. However, Hynes quickly clarified that this defense would likely be advantageous to Ripple rather than its user base.

Despite the various potential outcomes of the case, Hynes consistently maintained his doubt that the court would conclude that the XRP asset is a security.

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