The blockchain payments company Ripple recently won a crucial legal battle when the judge determined that its sales of XRP to individual investors did not constitute an offering of investment contracts. The court did decide, however, that institutional XRP transactions did in fact represent an unregistered offer and sale of investment contracts.
Marc Fagel, a former regional director of the SEC and skilled lawyer, now thinks that this victory for Ripple and XRP would be fleeting if the case is appealed to the Second Circuit Court.
According to Fagel, the court’s ruling has produced a split result that has harmed both sides of the argument. Although crypto fans may rejoice over the completion of secondary sales, Fagel believes that this aspect of the judgement is at odds with the purpose of the securities rules.
Welcome to lap two
Fagel admits the contract law position but differs from the perspective of securities when responding to the claim that the court rejected the existence of a contract because purchasers on exchanges do not know the sellers. Ex-attorney draws a comparison to stock purchases and emphasises the absurd difference in results between investment contracts and other types of assets, speculating that the Second Circuit Court would overturn the ruling.
Veteran of the SEC takes interest in the Second Circuit’s viewpoint but anticipates a protracted wait for the decision. He thinks the court made a reversible mistake in concluding that no reasonable investor would anticipate benefits from a third party when buying an item indirectly. Fagel’s perspective that Ripple’s victory in the lower court might be limited in the appellate process is supported by his experience as an SEC director.
