- Jeremy Hogan stated that XRP can only fit under the “investment contract” category, not as a stock or bond.
- The “Howey” case and its subsequent cases govern the analysis of an investment contract, as per the attorney.
- A contract of some sort is required for a reasonable reliance and legal recourse.
In a recent Twitter thread, attorney Jeremy Hogan shared what he believes to be the number one reason why XRP, a popular cryptocurrency, is not considered a security. According to Hogan, the legislative definition of security only allows XRP to fit under the category of an “investment contract.”
The #1 reason why XRP is not a Security (a thread).First, under the legislative definition of a security, XRP can only POSSIBLY fit under the definition of an "investment contract." It is not a stock or bond, etc..Even the SEC concedes this: "investment contract." pic.twitter.com/n9g7ZEos2n— Jeremy Hogan (@attorneyjeremy1) April 9, 2023
This means that XRP cannot be classified as a stock or bond. Hogan further highlighted that even the SEC has acknowledged this by referring to XRP as an “investment contract.”
In a follow-up to his previous Twitter thread, attorney Jeremy Hogan has shared additional insights into the analysis of XRP as an “investment contract.” Hogan explains that the “Howey” case and its subsequent cases govern the analysis of an investment contract.
The “test” in the case, which requires an investment in a common enterprise with the expectation of profits from the efforts of others, was in response to a lower court opinion that deemed a “speculative” investment as necessary. According to Hogan, this legal framework is crucial in determining whether XRP should be classified as a security or not.
Attorney Jeremy Hogan has continued his Twitter thread, providing further analysis on the “investment contract” analysis for XRP. Hogan explains that while the Howey case did not focus on the “contract” element of the test, it was already established that a contract was necessary.
Hogan references the Joiner case, in which the court had discussed the existence of an enforceable implied or explicit agreement between the offeror and purchaser – an “investment contract.” In contrast, Hogan notes that in the Ripple case, the SEC has not argued for the existence of an implied or explicit contract of investment. Instead, the SEC argues that the purchase agreement is all that is required. However, Hogan argues that a simple purchase, without more, cannot be an “investment contract.”
Hogan further highlights that all of the “blue sky” cases, which dictate the definition of “investment contract,” had a “contract” regarding the investment. He also notes that the oft-quoted four-part test implies that a “contract” of some sort is required. According to Hogan, this legal requirement for a contract is crucial for a person to reasonably rely on an offeror to make them a profit and have legal recourse in case the offeror fails to come through.
Moreover, the “security” designation is not intended to protect investors from poor choices, but to mandate offerors to disclose information regarding the purchase agreement. The concern in the Ripple case is whether the SEC has shown an implied or explicit “investment contract” between Ripple and XRP purchasers, and there was no such agreement. The inquiry is not about whether XRP sales funded Ripple’s operations.
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