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Legal Expert Explains How the SEC Has Been Abusing Howey Test in Its Case against Ripple and XRP

A lot of crypto and legal experts have aired their opinions on the ongoing lawsuit filed by the United States Securities and Exchange Commission (SEC) against Ripple, the San Francisco-based cross-border payments firm, for allegedly selling XRP for relatively seven years as an unregistered security.

The latest legal expert to air his opinion over the case is J.W. Verret, an associate professor of law at George Mason University’s Antonin Scalia Law School and a member of the SEC’s Investor Advisory Committee.

Read Also: Credible Crypto Issues XRP Price Warning after a Crucial Ruling in Favor of Ripple

In a recent article published on Law360, Verret noted that the SEC has been abusing the Supreme Court’s Howey test by consistently failing to give regulatory clarity on digital assets and didn’t provide legal advice before deciding to file the lawsuit.

Stating what the current SEC chair is doing wrong, Verret wrote:

“Yet when Gensler is asked by members of Congress to provide more guidance about what he means, which tokens are securities and why they are deemed so, he will often respond that the SEC “doesn’t give legal advice.”

“That sort of gotcha game is inconsistent with the rule of law and the principles of a free society. It is worth paying close attention to the U.S. Supreme Court’s Howey test, which determines whether an asset is an investment contract or security required to register with the SEC.”

Verret says the lawsuit filed by the SEC against Ripple for sales of XRP tokens reveals the limits of the Howey Test, a case used to classify transactions under an investment contract.

Read Also: CryptoLaw Founder Shares 16 Facts That Prove the Case Will End In Favor of Ripple and XRP

While airing his opinion on the latest denial of the SEC’s motion to stop Ripple from using the fair notice defense, a verdict Ripple CEO termed as a big win, Verret said:


“If the case continues to drag on, it may even provide circuit courts or the Supreme Court with an opportunity to curtail the Howey test’s current application, as in subsequent interpretations the test has strayed far from its original meaning in the Howey decision, particularly with respect to the “common enterprise” and “profit from others” elements implicated in this case.”

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Solomon Odunayo
Solomon Odunayo
Solomon is a trader, crypto enthusiast, and analyst with over four years of experience in the industry. He strongly believes that crypto assets and the blockchain will continue to gain prominence. At, he focuses on news, articles with deep analysis of blockchain projects, and technical analysis of crypto trading pairs.

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