RP is not a security, says Christopher Giancarlo, former chairman of the Commission on the derivatives trading (CFTC).
In an article for IFLR magazine, Giancarlo and his colleague from law firm Willkie Farr & Gallagher Conrad Balke argue that the XRP token is not an investment contract and therefore cannot be considered a security in the context of the Howe test of the US Securities and Exchange Commission (SEC).
“XRP cannot be an investment contract, because there is no investment agreement or agreement between Ripple and the vast majority of token holders,” the authors emphasized.
According to them, like Bitcoin and Ethereum, which US regulators do not classify as securities, XRP is “sufficiently decentralized to avoid regulation.”
According to the Howie test, an asset is an investment if its holder expects profit as a result of the efforts of other participants in the enterprise.
“The fact that a person owns XRP does not create any relationships, rights or privileges with respect to Ripple,” the article says.
Regarding the fact that the company itself owns a large number of coins, Giancarlo and Balca wrote the following:
“Despite the fact that Ripple owns large XRP reserves on an escrow account and finances its operations through token sales, this is no different from bitcoin, where miners sell mined coins.”
According to them, Ripple never presented its token as an investment product. On the contrary, the company “repeatedly emphasized the functionality of XRP as a liquidity tool and settlement mechanism.”
The authors emphasize that instead of a security token, XRP should be considered as a means of exchange.
“The wider acceptance by consumers and the XRP business as a medium of exchange and form of payment in recent years once again underlines the value of the token.”
The material mentions that the law firm advises Ripple "on certain issues." In turn, a California startup provided “some factual information” that helped Giancarlo and Balca write an article.
Earlier, the head of Ripple Brad Garlinghouse said that XRP is better for payments than Bitcoin and Ethereum.
