Thread by @JohnEDeaton1

THE LAW BEING IGNORED in @SECGov 🆚 @Ripple:

“The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.”

- Supreme Court in SEC 🆚 W.J. Howey (1946).

https://twitter.com/johnedeaton1/status/1459913408157995016

The SEC repeatedly argues #XRP is a speculative investment. Yet, the very next line in Howey is:

“If that test be satisfied, it is immaterial whether the enter-prise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value.”

Howey was decided in 1946 so one might argue there’s no precedent related to cryptocurrencies. NOT TRUE.

In 2019, the federal court in the SDNY handed down the #Telegram case.
Telegram was a pure ICO and money was raised PRIOR to the blockchain technology being developed.

But the Court handed down a decision that @GaryGensler and the SEC are choosing to ignore.

The Telegram Court held:

“Cryptocurrencies are a lawful means of storing or transferring value and may fluctuate in value as any commodity would. In the abstract, an investment of money

in a cryptocurrency utilized by members of a decentralized community connected via blockchain technology, which itself is administered by this community of users rather than by a common enterprise, is not likely to be deemed a security under the familiar test laid out in Howey.”

That decision is pretty damn clear. But it gets clearer:

“the security in this case is not simply the Gram, which is
little more than alphanumeric cryptographic sequence. Howey refers to an investment contract, i.e. a security, as “a contract, transaction or scheme,”

“using the term “scheme” in a descriptive, not pejorative, sense.”(Citing Howey).

“This case presents a “scheme” to be evaluated under Howey that consists of the full set of contracts, expectations, and understandings centered on the sales and distribution of the Gram.”

“Howey requires an examination of the entirety of the parties’ understandings and expectations.”

The above quoted language is the law that governs the SEC 🆚 Ripple case. In Howey, there were two written contracts:
1) for the land (orange grove); and 2) a service contract.

The Supreme Court focused it’s decision NOT on the oranges 🍊, land, or the contracts themselves, but the scheme of how it was packaged, marketed and sold. The Telegram Court reiterated that focus. The oranges 🍊 or the tracts of land were never the securities. It was the scheme.

Even more significant, is a SECOND DECISION in Telegram wherein the Court made it even more clear. The SDNY Court held:

“the “security” was neither the Gram Purchase Agreement NOR THE GRAM but the entire scheme that comprised the Gram Purchase Agreements…”

Despite the 👆 applicable law FROM THE SAME COURT governing the Ripple case, the SEC argues that XRP itself is a security. Incredibly, the SEC claims ALL XRP - even XRP traded in the secondary market with no connection to Ripple (8 yrs retroactive) are ALL investment contracts.👇

The Complaint filed against Ripple and XRP is written in a way that threatens all altcoins. You can substitute XRP with other cryptocurrencies and the same language applies.👇The SEC could’ve limited it’s allegations to only include sales of XRP made by Ripple. Why didn’t it?