While the cryptocurrency community awaits the ruling in the case between the United States Securities and Exchange Commission (SEC) and blockchain company Ripple, lawyer Bill Morgan has offered his perspective on some rarely posed questions.
As it happens, Morgan made a distinction between programmatic sales of XRP and sales to on-demand liquidity (ODL) customers, whereas “the preference seems to be to distinguish early and later sales rather than types of sales,” he explained in a Twitter thread on June 29.
ODL versus programmatic sales
Specifically, he referred to Ripple’s ODL system that helps customers move money across borders instantly and at a low cost, without the need for correspondent banking relationships and the pre-funding of accounts abroad, whereas programmatic sales refer to open market exchange trades.
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According to the lawyer:
“My theory is Ripple XRP sales to ODL customers cannot be investment contracts because there is no investment or investment intent by ODL customers and no expectation of profits by ODL customers who hold XRP for a very short time and use it akin to consumption.”
Furthermore, Morgan argues that Ripple had no knowledge of the retail users in the programmatic sales of XRP since market makers were the ones facilitating them, partly through crypto exchanges “through the blind bid/ask transactions.” According to him:
“The SEC would be in a stronger position in this litigation if it had limited the complaint to programmatic sales instead of alleging a single 8 year undifferentiated offering that includes very different types of sales such as sales to ODL customers.”
On top of that, Ripple pausing programmatic sales shortly after the SEC’s September 2019 warning, “in which the SEC staff told Ripple the SEC was likely to see sales of XRP as securities transactions,” and its move to only direct XRP sales to ODL customers further strengthened concerns around the programmatic sales.
However, as Morgan acknowledged, this “does not mean Ripple believes the SEC is correct, but it shows a higher risk at least that programmatic sales are investment contracts.”
No ‘secret plot’
In the meantime, pro-XRP defense attorney John E. Deaton dismissed the rumors of a “secret plot” in the ongoing legal battle in a recent video, stressing his involvement and the support of over 76,000 XRP investors, the significant financial resources that poured into Ripple’s defense, and the damage done to XRP’s reputation.
Meanwhile, Blockchain Association’s chief policy officer Jake Chervinsky said that SEC chair Gary Gensler had wrongly prejudged that all cryptocurrencies were securities and that, as a result, federal law required that he recused himself from all enforcement decisions related to crypto assets, further arguing this in a paper he co-authored with Marisa Tashman Coppel.
As things stand, the XRP token that is at the center of the lawsuit is currently changing hands at the price of $0.4762, which indicates an increase of 1.54% on the day but still a decline of 3.89% across the last week and a 6.05% drop over the previous month, as per data retrieved on June 30.
