Ripple CEO Brad Garlinghouse recently responded to claims made by Fox Business panelist and journalist Charles Gasparino regarding the US Securities and Exchange Commission’s stance on XRP. Gasparino had suggested that the SEC believes XRP passes the “Ethereum decentralized test,” to which Garlinghouse swiftly debunked, stating that there is no such test at the SEC and that the claim is purely fictional.
The legal battle between Ripple Labs and the SEC began in December 2020 when the agency filed a lawsuit against the company, alleging violations of US securities laws related to the sale of $1.3 billion worth of XRP. The SEC argued that Ripple had failed to register XRP as a security and neglected to provide necessary disclosures to investors.
Gasparino’s reference to the “Ethereum decentralized test” raised questions about whether he meant the Howey test or the Ethereum test, both of which have been cited by members of the SEC in the past. The Howey test, derived from a 1946 Supreme Court ruling, defines a security as an investment where profits are primarily expected from the efforts of others. The SEC applied this test to XRP, claiming that it met the criteria during its public offering, while Ethereum was previously determined not to be a security.
Former SEC Director William Hinman had suggested in a 2018 speech that Ethereum did not meet the criteria of a security under the Howey test, which he also referred to as the “Ethereum test.” The concept behind the decentralization framework is that if a crypto project operates without a central entity or controlling group, there is no clear “issuer,” ensuring fair access to information for all participants.
Internal SEC discussions revealed uncertainties about Ether’s classification, with emails from officials expressing concerns and suggesting stronger language to clarify Ether’s status as a non-security asset. Despite these discussions, the SEC ultimately decided not to regulate Ethereum as it was offered in 2018, as disclosed in documents released by Ripple as part of their legal defense.
As the news of the end of the SEC vs. XRP legal battle circulated, XRP’s price surged by 13.2% in the last 24 hours, trading above $2.5. Analysts are optimistic about XRP’s future performance, with some predicting a strong upward trend following a recent downward cycle. Price projections suggest XRP could reach $2.79 to $2.92 before a potential pullback, indicating a bullish market sentiment among investors.
Overall, the developments surrounding XRP and the SEC’s position on cryptocurrencies continue to shape the market dynamics, with Ripple’s legal battles and price movements drawing significant attention from industry observers and investors alike.