In a recent discussion surrounding the ongoing legal dispute between Ripple and the U.S. Securities and Exchange Commission (SEC), a former attorney and ex-SEC director, Marc Fagel, voiced his agreement with a controversial opinion by a member of the XRP community. The conversation focused on the desired outcome in the SEC’s case against Ripple.
The discussion was initiated when technology company CEO Steven Mizrahie tweeted that the SEC had finally advanced its legal theory of secondary market sales in response to CB’s Rule 12(c) motion.
Policy Alignment vs. Precedent In Ripple Lawsuit
Marc Fagel responded, expressing his belief that the SEC’s stance aligns with policy objectives and the intent of securities laws. However, he acknowledged that the issue of precedent is a separate matter. Fagel considered it a novel case that could swing either way, contrasting with those who argue that the SEC is overstepping its bounds.
Prominent XRP attorney Jeremy Hogan chimed in, presenting a logical argument to Marc Fagel. He suggested that if the “sales scheme” rendered the token a security in perpetuity, it would logically follow that if the sales scheme did not classify the token as a security, it should also not be considered a security in perpetuity. Hogan found the latter situation nonsensical.
Marc Fagel responded, stating that he assumed the original offering involved security. He clarified that the situation is even more complex, while a commodity could be securitized later. Fagel recognized that a token’s utility might exempt it from securities regulation.
According to Fagel, the key question is whether the SEC bears the burden of proving that each subsequent sale involves a security if the initial offering was indeed a security. Alternatively, should the responsibility lie with the seller or exchange to demonstrate that the token has transformed into something else due to utility or other factors? Fagel believed that this is where the law remains unsettled, with both sides presenting compelling arguments.
Crypto enthusiast Jack ‘O also joined the conversation, expressing confusion regarding the lack of recognition of utility in the amicus briefs, such as the case of an airline using XRP for off-business hours payment. He argued that there were clear examples of utility.
In response, Marc Fagel explained that the SEC’s submissions assert minimal utility during the period covered by the lawsuit, which justified the classification of a securities offering. Fagel acknowledged that the situation may have evolved since then, adding to the complexity of the secondary market issue.
However, it remains to be seen how these different perspectives will shape the Ripple vs. SEC outcome, leaving many in the crypto community eagerly watching for further developments.
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