The news updates from the Ripple case are not just a concern for XRP holders. The nature of the case has the potential to put all available cryptocurrencies through the wringer. Last month, the Securities and Exchange Commission of USA (SEC) filed a lawsuit against Ripple Labs executives. The lawsuit charged Ripple executives for violating the US securities Act of 1933. This lawsuit was put into motion on the last day of former SEC chief Jay Clayton.
The reaction from the crypto community was strong towards this lawsuit. This legal battle has started to turn into a case study that is dealing with the status of XRP as a cryptocurrency or a security. Originally, SEC charged Ripple Labs with the allegations for dealing in unregistered securities. In response to this lawsuit, the XRP holder John Deaton attempted to pass a petition to disprove XRP as a security. However, this rebuttal backfired and got XRP into a bigger mess than ever before.
Ripple Getting Siphoned By Major Exchange Platforms
Since the filing of this lawsuit, XRP has lost $15 billion in value and dropped to a whopping 63% low. As the SEC has revoked the status of XRP as registered security, the regulated exchange platforms have no option but to delist XRP or stop dealing this commodity among their US-based clients. Around 50 institutions, including Grayscale, have also washed their hands off of XRP.
Deaton, who is a seasoned lawyer and expert at class actions, has not been able to justify his position to the court of law thus far. His petition provided the court with the impression that XRP is a cryptocurrency and not a security because it has several legitimate functions. However, as the records show, SEC has never accepted the status of a currency based on functions. This has also put the status of other leading cryptocurrencies in jeopardy.
Can XRP Pass the Litmus Test of Securities?
According to SEC, XRP needs to go through the Howey Test. Howey test is a legal ruler that provides parameters for security qualification. According to this test, any commodity that is exchanged for money or something of value by an enterprise where the purchaser earns profit through others’ institutional efforts is security. Deaton has already claimed in his petition that XRP can be treated like a foreign exchange commodity rather than a security.
The terms of the Howey test are not enough to qualify XRP as a security. However, SEC is still adhering to their original claims. The public speculation and reaction towards this incident are that this is an attempt of the US government to take hold of a huge potential market. Since the filing of this case, the prices of other major cryptocurrencies like Bitcoin and Ethereum have also come down.