- Ripple’s CLO criticizes Hinman’s speech for creating regulatory confusion in crypto.
- Court rulings on XRP and BNB emphasize case-by-case analysis of crypto transactions.
- The Howey Test remains central to determining whether a crypto asset is a security.
Ripple’s Chief Legal Officer, Stuart Alderoty, reignited debate over regulatory clarity in the cryptocurrency space, criticizing a pivotal 2018 speech by former SEC Director William Hinman as a “fairy tale.”
Alderoty argued that Hinman’s speech, which suggested cryptocurrencies could “magically morph” between securities and non-securities, has created confusion in the market.
Alderoty’s comments came in the wake of a recent court ruling in the SEC’s case against Binance, which echoed a previous decision regarding Ripple’s XRP token. In both cases, the judges rejected the SEC’s argument that all sales of a cryptocurrency should be considered securities, with the courts emphasizing the need to examine the specific circumstances of each transaction.
In his X post, Alderoty quoted a passage from Judge Jackson’s Binance ruling that he believes highlights the confusion caused by Hinman’s speech. The passage questions the SEC’s departure from the established “Howey Test,” which determines whether an asset is a security based on the characteristics of the investment contract, not the nature of the asset itself.
“Insisting that an asset that was the subject of an alleged investment contract is itself a “security” as it moves forward in commerce and is bought and sold by private individuals on any number of exchanges…marks a departure from the Howey framework…with no clear differentiating principle between tokens in the marketplace that are securities and tokens that aren’t.”
Alderoty further emphasized that the key question is not whether a token is inherently a security, but whether it is “offered as, or sold as” a security. This distinction aligns with the court’s rulings in both the Ripple and Binance cases, which focused on the specific circumstances surrounding the sale and marketing of the tokens in question.
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