On Monday (14 November 2022), Charles Hoskinson, Co-Founder and CEO of Input Output Global (aka “IOG”), the blockchain technology firm behind Cardano’s R&D, talked about why he believes the U.S. SEC decided to allege that $XRP is a security instead of $ETH.

on 14 June 2018, William Hinman, the director of the Division of Corporation Finance at the U.S. Securities and Exchange Commission (“SEC”), made a speech at Yahoo Finance’s “All Markets Summit: Crypto” one-day event in San Francisco, California. The speech was about how the SEC plans to use the “Howey Test” to determine whether a digital asset should be considered a security or not. The only two cryptocurrencies Hinman mentioned by name were Bitcoin (BTC) and Ether (ETH), neither of which he said should be considered as securities:

And so, when I look at Bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise. The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value...

And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.

As you may remember, on 22 December 2020, the SEC announced that it had “filed an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.”

Last Sunday (13 November 2022), American lawyer John Deaton, the owner of the Deaton Law Firm (which is based in East Providence, Rhode Island), claimed that lack of regulatory clarity in the U.S. has “has driven business activity offshore increasing the chances for fraud and corruption.”

Then, after Deaton said in a subsequent tweet that Charles Hoskinson “should be in there talking to regulators way before SBF”, the IOG CEO said:

Deaton went on to say that he found it strange that Hinman had given “a regulatory free pass” to $ETH but not to $XRP:

Next, Ripple CTO David Schwartz jumped into the conversation, which led Hoskinson to explain why he thinks the SEC decided not to target $ETH:

Hoskinson then explained where in his opinion Ripple had made a mistake:

Hoskinson went on to say that he understood this is a frustrating situation for coins/tokens other than $BTC and $ETH: