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Ripple v. SEC: Ex-CFTC Lawyer Reveals True Meaning of XRP Ruling

Mon, 07/31/2023 - 09:38
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Gamza Khanzadaev
Ex-CFTC lawyer explains real meaning of XRP court ruling
Ripple v. SEC: Ex-CFTC Lawyer Reveals True Meaning of XRP Ruling
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Mike Selig, crypto and finreg lawyer and former official at the CFTC, took to Twitter to provide invaluable insights into the complexities surrounding the classification of XRP. In particular, he has illuminated the actual significance of the XRP ruling in the ongoing legal battle between Ripple and the SEC.

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At the core of Selig's analysis lies a key distinction made by Judge Torres: XRP itself was not labeled as a security. Instead, the expert emphasizes that the court's ruling underscored that XRP, considered as computer code, shares traits with fungible commodities. However, the critical aspect is that XRP can potentially be sold as part of a security, thereby subjecting it to securities laws under specific conditions.

Selig brings into focus the well-known "Howey test," which determines whether a contract, transaction or scheme qualifies as an investment contract, thereby falling within the scope of securities laws. This regulatory void, as Selig coins it, has created ambiguity in the regulation of crypto assets, allowing some freedom for the industry but raising concerns about investor protection and market integrity.


To address this gap, Selig suggests legislative action as the way forward. He advocates for empowering regulatory agencies like the SEC or CFTC with expanded authority to develop specialized regulations tailored to the unique characteristics of crypto assets. However, Selig points out that legislative support is vital, as the SEC's jurisdiction alone might not be enough to tackle the complexities of the evolving crypto landscape.

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Selig notes that the SEC seems to lean toward treating crypto assets as securities when targeting specific investors. This approach aims to fill the regulatory void by considering the investment contract, transaction or scheme as the security itself, rather than the underlying token. Nevertheless, he cautions that without legislative backing, the SEC's ability to effectively address the intricacies of the crypto industry could be limited.

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About the author

Financial analyst, trader and crypto enthusiast.

Gamza graduated with a degree in finance and credit with a specialization in securities and financial derivatives. He then also completed a master's program in banking and asset management.

He wants to have a hand in covering economic and fintech topics, as well as educate more people about cryptocurrencies and blockchain.