Javier Hernandez A senior U.S. district judge, Jed S. Rakoff, has disagreed with the approach used in the Securities and Exchange Commission (SEC) v. Ripple ruling concerning XRP. This disagreement came to light during the SEC v. Terraform Labs case where the SEC is pursuing charges against Terraform Labs and its co-founder Do Kwon. The SEC urged Judge Rakoff not to follow the reasoning of Judge Analisa Torres in the Ripple case, arguing that the ruling was incorrect. The key point of contention lies in whether tokens, like XRP, should be considered securities based on their method of sale, with Judge Rakoff rejecting the distinction made by Judge Torres between coins sold directly to institutional investors and those sold through secondary market transactions to retail investors.
Following this development, there have been mixed reactions on Twitter. Former SEC internet enforcement chief John Reed Stark believes the Ripple ruling is in trouble and anticipates further rejections of it. On the other hand, some still support Judge Torres’ ruling, noting that Judge Rakoff’s opinion in the Terra case doesn’t entirely depart from the Ripple holding. Both sides acknowledge that the application of the Howey test, particularly the reasonable expectation of profits prong, yielded different results in Terra compared to Ripple.
In the comments section, readers are invited to express their thoughts on Judge Rakoff’s rejection of Judge Torres’ approach in the SEC v. Ripple case involving XRP.
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Frequently Asked Questions (FAQs) about Token classification
Q: What is the main issue Judge Rakoff disagrees with in the SEC v. Ripple case?
A: Judge Rakoff disagrees with the approach taken by Judge Torres regarding the classification of tokens like XRP as securities based on their manner of sale. He rejects the distinction between coins sold directly to institutional investors and those sold through secondary market transactions to retail investors.
Q: What is the significance of Judge Rakoff’s disagreement in the SEC v. Terraform Labs case?
A: Judge Rakoff’s disagreement in the SEC v. Terraform Labs case is significant as it indicates a difference of opinion within the legal community on how tokens should be classified and regulated. It also opens up a debate on the application of the Howey test in such cases.
Q: How has the legal community responded to Judge Rakoff’s action?
A: The legal community has shown mixed reactions. Some, like former SEC internet enforcement chief John Reed Stark, believe the Ripple ruling is in trouble and expect further rejections of it. Others still support Judge Torres’ ruling and argue that Judge Rakoff’s opinion in the Terra case doesn’t completely depart from the Ripple holding.
Q: What do some experts think about Judge Rakoff’s decision?
A: Some experts, like Justin Browder, a partner in Willkie’s Asset Management Department, highlight that Judge Rakoff agrees with the fundamental premise in Judge Torres’s decision – that tokens themselves are not investment contracts. However, the application of the Howey test produces different results in the Terra case compared to the Ripple case.
Q: What is the current stance of the SEC on the Ripple ruling?
A: The SEC has expressed its disagreement with the Ripple ruling, stating that it was “wrongly decided.” They plan to appeal the decision and have asked Judge Rakoff not to follow Judge Torres’s reasoning in the Ripple case.
Q: How are people reacting to these legal developments?
A: People are taking to Twitter to voice their opinions, with some supporting Judge Rakoff’s stance while others still believe in Judge Torres’ ruling on XRP. The situation has sparked a broader discussion on token classification and SEC regulations in the crypto industry.
More about Token classification
- SEC v. Ripple Labs Inc. (SEC’s official case)
- SEC v. Terraform Labs case
- Judge Jed S. Rakoff’s profile
- The Howey Test (Investopedia)
- Former SEC internet enforcement chief John Reed Stark’s opinion
- Justin Browder’s insights on Twitter
- SEC’s official website
