Michael Arrington, the founder of the web-based news site TechCrunch and venture capital firm CrunchFund, has recently revealed he believes that the U.S. Securities and Exchange Commission (SEC) disapproves of Ripple’s democratization of $XRP trading.
Arrington’s remarks were aired during a previous episode of The Layah Heilpern Show, a podcast focusing on entrepreneurship. He suggested that the SEC’s discontent was centered on Ripple’s decision to make XRP trading accessible to all, irrespective of their economic status.
He further proposed that the SEC’s legal actions against Ripple were motivated by a desire to claim a significant victory, a conjecture he admitted was purely speculative.
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.”
Ripple’s CEO, Brad Garlinghouse, has recently revealed he is optimistic the case will soon be resolved, noting he believes it will end before the end of the third quarter of the year.
To Arrington, the SEC seems to “desire Ripple’s demise as a notch on their belt.” While the entrepreneur emphasized he does not know what will happen to XRP, he added he believes it isn’t a security. What is or isn’t a security, he said, is “totally irrelevant.”
He added that the crux of the matter is whether trading of an asset is limited to the affluent or open to all, noting that because he had a fund and was wealthy he was able to be an early investor in companies like Uber, Airbnb, and Pinterest, while most other people were not.
Arrington decried the government’s role in perpetuating this disparity, lamenting that it has deemed people unable to make sound financial decisions independently because of their lack of capital. As a result, they miss out on potentially enormous returns from companies like Uber, Pinterest, and Airbnb.
He went on to criticize the SEC’s patronizing stance, arguing that its presumption that lower-income individuals lack the savvy to make the same decisions as their wealthier counterparts is not only condescending but also fundamentally unjust. He said:
- The SEC comes in and says, ‘we don’t think poor people are smart enough to make decisions the rich people are, so we’re going to stop them from doing that.’ That’s evil
The entrepreneur contended that the regulatory focus should be on preventing fraudulent activities rather than limiting the financial autonomy of individuals based on their wealth. By his reasoning, every investor should have the liberty to trade and invest in XRP.
Arrington has in the past questioned the SEC’s lawsuit against Ripple over the XRP token, at the time arguing the Howey test, which asks whether the value of a transaction for one of its participants is dependent upon the other’s work, is outdated.
According to Investopedia, the test determines a transaction represents an investment contract if “a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.” Arrington, during the interview, said he believes the test is no longer relevant in the digital age.
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