Ripple CTO Doesn’t Believe that Selling an Asset as a Security Makes It One

Judge Torres' recent XRP classification in the Ripple versus SEC lawsuit has been a hot topic of debate in the crypto community. In an August 13 exchange, David Schwartz, Ripple Labs'CTO, argued that assets don't become securities, even if sold or offered as investment contracts.

I don't think that claim is true. (For example, Howey has to buy orange groves to sell them. If successful, they'll add to the demand for groves.) But even if it was, it wouldn't render the SEC's legal theory coherent. That something was sold as a security doesn't make it one.

- David "JoelKatz" Schwartz (@JoelKatz) August 13, 2023

Judge Torres ruled that the institutional sales of XRP coins are securities, as institutional investors anticipate profit from the organization. Also, she ruled that the retail sales of the coins by Ripples to investors through exchanges do not constitute securities.

Ripple CTO On the Classification of Asset Sales

In the recent debates, the Ripple CTO noted that a digital asset doesn't become a security only because it was previously sold as an investment contract. In the debate, David Barrera, Enumma's Co-founder, and CEO, argued that an individual purchasing a token in a secondary marketplace might expect profit from the asset's promoters for certain reasons.

Moreover, Schwartz didn't agree with Barrera, stating that his claim was untrue. Citing a document released by attorney Bill Morgan, Schwartz noted that the SEC's implementation of the Howey theory in the Bittrex suit needs to be clarified. Ripple CTO buttressed that the sale of an asset as a security does not necessarily make it on.

Sale of Assets Without its Contractual Rights Doesn't Classify It as a Security

Amid the debate, another X user, Jason Coombs, responded to Schwartz's comment, noting that Howey didn't sell orange groves. Instead, Howey sold trees arranged in rows. Coombs added that Howey sold grown trees at costlier prices while distributing a portion of the profit to investors according to their size and class."

In addition, Coombs noted that the Supreme Court in Howey revealed that therow of trees" is an investment contract scheme if it contained the key ingredient. And that key ingredient is a dividend of the common enterprise.

Thus, he pointed out that any person reselling Howey Trees would automatically be reselling securities, with investors able to own each Row, and these Rows would only be accessible through Howey.Schwartz responded that simply because an institution offers and sells an asset as an investment contract, that does not make it one.

A US Attorney and Pro-XRP lawyer, John Deaton, shares the same sentiment as David Schwartz. While he acknowledges that Ripple Labs may have sold XRP as a security in the past, he still strongly argues that single action doesn't classify the token as a security.

It is worth noting that Deaton revealed that 52% of the more than 10,000 investors he spoke with claimed that they didn't know about Ripple Labs when they bought XRP tokens for the first time.

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