Top legal expert says most commentators are wrong in analyzing Judge Torres’ ruling concerning XRP security status.
Mike Selig, a crypto and financial regulation lawyer, has taken to Twitter to clarify Judge Analisa Torres’ ruling in the SEC v. Ripple case.
In a thread yesterday, Selig said it is wrong for commentators to claim Judge Torres ruled that XRP is a security when sold to institutional clients and not a security when sold to retail investors.
Continue to hear commentators saying Judge Torres held that XRP is a security when sold to institutions and not a security when sold to retail. This is incorrect. Judge Torres held that XRP itself is not a security, but it can be sold as part of a security. /1
— Mike Selig (@MikeSeligEsq) July 30, 2023
According to Selig, Judge Torres held that XRP itself is not a security. However, she ruled that the coin could be sold as part of a security.
Selig’s remarks come days after US Congressman Brad Sherman slammed the ruling, saying it is ridiculous for the judge to rule that XRP is sometimes a security and sometimes not.
XRP Is a Computer Code
Selig emphasized that XRP is only a computer code. Like gold and whiskey, he said XRP could be sold as part of an investment scheme that implicates securities laws.
XRP itself is simply computer code. A fungible commodity, like gold or whiskey – both of which can also be sold as part of investment schemes that implicate securities laws. /2
— Mike Selig (@MikeSeligEsq) July 30, 2023
The crypto lawyer noted that it is the court’s responsibility to determine whether someone invested money in a common enterprise and expects profit based on the efforts of others.
He noted that there need to be sufficient facts to prove that a transaction or scheme satisfies each element of the Howey test. Per Selig, the judge concluded there were insufficient facts regarding certain XRP sales.
Notably, the Howey test is a legal test that determines whether a transaction constitutes an investment contract in the US.
Not Easy to Tell How Judge Torres Misapplied the Law
Per Selig, it is difficult for anyone to state how Judge Torres misapplied the law in the Ripple case. He added that there is no legal precedent supporting the view that a commodity can somehow embody a security.
“It is hard to say how Judge Torres could have misapplied the law.”
Furthermore, he said other courts have also held that crypto assets are not contracts, transactions, or schemes. Thus, they cannot be investment contracts, he added.
“Judge Torres refused to legislate from the bench that crypto assets can be deemed to embody an investment contract,” he said.
Legislation Required for Crypto
The top legal expert said Judge Torres’ decision in the Ripple case exposed a significant regulatory gap about crypto assets. Selig said the ruling suggests that most crypto transactions are not likely to implicate securities laws.
He stressed that legislation would be required to fix the regulatory gap for crypto assets. Selig added that through legislation, the SEC or CFTC could expand its authority to promulgate new regulations for crypto assets.
Deaton Reacts
Interestingly, Crypto-Law.US founder John Deaton reacted to Selig’s opinion on Judge Torres’ decision. The pro-XRP lawyer noted that it is amazing how several experts continue to misstate the judge’s decision.
Attorney Deaton questioned whether people genuinely confused the judge’s decision or intentionally misstated her ruling to promote a false narrative.
It’s amazing how many people including financial commentators continue to misstate the Torres Decision. Mike explains it well below. The question I have is whether this is genuine confusion or are people
intentionally misstating what she said to promote a false narrative.… https://t.co/1xXqiNEi4F— John E Deaton (@JohnEDeaton1) July 30, 2023
Meanwhile, Attorney Deaton swiped at Rep. Sherman for being among the politicians who ignore the law and promote government control over all financial markets.
