In a recent court verdict, Ripple, the blockchain payments firm, achieved a significant victory as the court ruled that its sales of XRP to retail investors did not constitute an offering of investment contracts. However, the court determined that institutional sales of XRP did constitute an unregistered offer and sale of investment contracts.
Now, a former SEC regional director and experienced attorney, Marc Fagel, believes that this triumph for Ripple and XRP may be short-lived if the case is appealed to the Second Circuit Court.
Maybe from a contract law standpoint, but not from a securities standpoint. When you buy stock, you don't know who you're buying it from; that the outcome is radically different for an investment contract is illogical. I think there's a good chance the 2nd Circuit reverses.— Marc Fagel (@Marc_Fagel) July 16, 2023
Fagel contends that the court's decision has created a divided outcome, causing damage on both sides of the dispute. While crypto enthusiasts may celebrate the clearance of secondary sales, Fagel finds this part of the ruling inconsistent with the intent of securities laws.
Welcome to lap two
Addressing the argument that the court dismissed the existence of a contract because buyers on exchanges do not know the sellers, Fagel acknowledges the contract law perspective but disagrees from a securities standpoint. Drawing a parallel to stock purchases, ex-attorney highlights the illogical disparity in outcomes between investment contracts and other forms of assets, predicting that the Second Circuit Court might reverse the decision.
SEC veteran expresses curiosity about the Second Circuit's perspective on the matter, but expects a long wait for the outcome. He believes that the court's conclusion that no reasonable investor expects profits from a third party when purchasing an asset indirectly is a reversible error. Fagel's experience as an SEC director lends weight to his opinion that Ripple's triumph in the lower court could be curtailed in the appellate process.