Pro-crypto lawyer Bill Morgan recently expressed his thoughts on Twitter, discussing the strategies that the U.S. Securities and Exchange Commission (SEC) might employ in their attempt to establish XRP as a security.
Alderoty’s View on SEC’s Common Enterprise Argument
Attorney Morgan’s analysis was prompted by Ripple’s Chief Legal Officer, Stuart Alderoty’s comment regarding the SEC’s unsuccessful attempt to equate the common interest with a common enterprise in the landmark 1946 Howey case.
In the Howey case brief, he argued that the SEC failed to successfully argue that an investment in a common enterprise was unnecessary if there was a common interest.
Furthermore, he firmly stated that the SEC was incorrect in 1946 and that their stance remains erroneous even today, emphasizing that a common interest does not equate to a common enterprise.
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How WIll SEC Prove XRP Is a Security?
In response to the post, attorney Morgan expressed his view that the SEC aims to significantly expand the scope of the Howey test to encompass cryptocurrencies.
According to attorney Morgan, the SEC intends to broaden the application of the Howey test to include cryptocurrencies by taking an expansive interpretation of the concept of “common enterprise.” He noted that the regulator has emphasized the term “common” while intentionally avoiding using the word “enterprise.”
The legal expert further mentioned that if the SEC’s initial argument falls short, they will resort to the “fungible argument” as a desperate measure. Attorney Morgan provided evidence demonstrating how the SEC contended that “all units of XRP are fungible with each other” and that their prices exhibit simultaneous movement.
Notably, Ripple’s legal counsel effectively countered the SEC’s fungible argument in their motion for summary judgment by comparing it to gold.
Is Cryptocurrency Safe?
Morgan cautioned that if Judge Analisa Torres permits the SEC to equate common enterprise with a common interest, it would set a precedent for the regulator to employ the same argument against other cryptocurrencies.
He further noted that the SEC has already begun employing the fungible argument to target the broader crypto industry, as evident in their complaint against Bittrex regarding Algorand (ALGO).