The SEC’s case against Ripple Labs remains one of the longest legal battles the crypto space has witnessed. The SEC has one fundamental claim against Ripple: “XRP is a security.” The financial watchdog has held on to this claim despite arguments against it.
A video that opposes the SEC’s claim recently surfaced. In the video, a former employee of the regulatory body highlighted why XRP is similar to ETH and BTC and does not fit the Howey Test.
John Berry thinks XRP does not fit the Howey Test
A Securities Docket webcast clip uploaded on YouTube features John Berry, ex-SEC lawyer, as he discusses XRP. Berry argued that XRP is similar to Ether and BTC in the clip. He acknowledged the differences between the three coins but insisted that none fit the Howey Test.
Berry’s comments replied to experienced litigator Sean Prosser’s question. Prosser asked if Ripple could have any defences should the SEC apply the Howey Test.
“The SEC, I think, is getting more aggressive,” he mentioned, adding that Ripple’s case fits into the category of aggressive cases. Berry further noted that XRP as a token is a lot similar to Ether which is then similar to BTC. He, however, pointed out that the SEC has never brought a case against Ether despite its similarity with XRP.
Speaking further, he admitted that the SEC could highlight features of XRP that make it different from Ether. “Ripple, they [the SEC] would say, marketed its XRP tokens as an investment,” he noted. He further said the SEC could point out that XRP is not as decentralized as BTC. This is because XRP uses validators to confirm transactions, with some validators being affiliated with Ripple.
Berry’s comments are similar to the Hinman speech
Berry acknowledged that the above and others are arguments the SEC could make that suggest XRP fits the Howey Test. Nonetheless, he mentioned that it would be a more challenging case. This is because one could argue that XRP, like BTC, which has been used to pay for goods and services all these years, is not an investment but similar to cash.
Berry’s comments share a similarity to William Hinman’s takes. In 2018, William Hinman mentioned that BTC and ETH could not be classified as securities. Hinman said this at Yahoo Markets Summit while serving as Director of Corporation Finance at the SEC.
The speech would effect a turning point in the SEC’s case against Ripple Labs. However, the regulatory body has refused to provide documents about the speech. Despite a court order requesting the relevant documents, the SEC has filed motions to keep them secret. The watchdog claimed Hinman made the statement out of his personal conviction and interest.