On Friday (20 January 2023), David Schwartz, who is Ripple’s Chief Cryptographer and Chief Technology Officer (CTO), explained why XRP is a commodity.
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.”
“You have to remember that 99.9% of XRP trading has nothing to do with Ripple the company. So when you talk about, okay, ‘XRP’s a security,’ I go back to something I said years ago when they started: ‘A security of what company? Who is the owner?’ I think it’s very clear there is no investment contract...
“If you get past the investment contract, which I think is hard, across the Howey Test, you have to meet all three prongs, and in the case of the XRP case, you can’t meet all three prongs for sure. And so we think that the judge will see that the law is very clear, we think the facts are very clear, we think this is just a gross overreach of the SEC trying to wrest control of that uncertainty that has existed...
“I think the ‘Ripple Test’ may be what we look at in the future. There are a lot of facts and circumstances that can be unique, but for Ripple, and what the SEC is trying to do, I do think it’s just the SEC trying to overreach the statute.”
It all started yesterday when a crypto enthusiast “Jay’V” on Twitter said “a settlement that allows ripple to carry on “with no changes” opens up a new world of problems.”
Schwartz then asked him:
“What problems do you foresee from a ruling that says that a sale of a commodity with no post-sale obligations of the seller to the buyer is not an ‘investment contract’?“
“Jay’V” then told him:
“If the judge rules in a way that clearly articulates that ripples sales are not security transactions then it’s fair game.. but I don’t see that coming from Gary.. also I believe that with that type of ruling, she must fully breakdown how #xrp constitutes a commodity.“
Schwartz then explained why he believes that XRP is a commodity:
“XRP is a raw good that trades in commerce and one XRP is treated as equivalent to every other XRP. That’s pretty much the definition of a “commodity”. No part of XRP’s value comes from anyone else’s legal obligations to XRP holders.“