Marc Fagel, a former lawyer and ex-director of the Securities and Exchange Commission (SEC), recently expressed his agreement with a contentious viewpoint offered by a member of the XRP community in a conversation about the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC). The discussion centered on the intended result of the SEC’s case against Ripple.
Steven Mizrahie, the CEO of a technological business, tweeted that the SEC had finally developed its legal theory of secondary market sales in response to CB’s Rule 12(c) petition, sparking the conversation.
The SEC finally advanced their legal theory of secondary market sales in it's response to CB's Rule 12(c) motion. In their reply, they invoke some recent cases (IE @LBRYcom and others). @JohnEDeaton1, @attorneyjeremy1, @Marc_Fagel, thoughts? pic.twitter.com/BUhAWXlVzK— Steven Mizrahie (@smizrahie) July 8, 2023
Ripple Lawsuit: Balancing Policy Alignment and Precedent
In his response, Marc Fagel stated that the SEC’s view aligned with policy goals and securities legislation’s intention. He admitted that the question of precedent is a different matter, though. Fagel disagreed with those who claim the SEC overstepped its authority and said this was a new situation that might go either way.
Marc Fagel was addressed by prominent XRP lawyer Jeremy Hogan, who responded with a reasoned argument. The token, he said, should not be regarded as a security in perpetuity if the “sales scheme” made it one. If the “sales scheme” did not designate the token as a security, it should not be considered a security in perpetuity either. The latter scenario made no sense to Hogan.
In his reply, Marc Fagel stated that he believed the initial offer included security. He clarified that while the issue is complicated, a commodity may eventually be securitized. Fagel knew a token might be exempt from securities legislation due to its usefulness.
Fagel contends that the crucial issue is whether the first offering constituted security. The SEC must demonstrate that each subsequent transaction also constitutes a security. Should the burden of proof now go on the seller or exchange to show that the token has changed due to usefulness or other considerations instead? Fagel thought that while both parties made strong cases, the law was still unclear in this area.
Jack ‘O, a crypto enthusiast, also joined the discussion and expressed concern over the amicus briefs’ failure to recognize some applications of XRP, such as when an airline used it to make payments outside of regular business hours. According to him, there were several instances of usefulness.
I don’t understand how just one of the amicus briefs clearly indicating utility (such as the airline that uses XRP for off-business hours payment) doesn’t confirm utility. Let alone ODL. There’s CLEAR utility and numerous examples of utility to boot.— Jack ‘O (@jack_O78) July 8, 2023
Marc Fagel responded by stating that the SEC’s arguments establish low usefulness within the time period encompassed by the complaint. This supported the designation of a securities offering. Fagel recognized that things could have changed since then, complicating the secondary market problem.
However, it’s unclear how these viewpoints will affect the conclusion of the Ripple vs. SEC case. This has left many in the cryptocurrency industry eagerly awaiting further information.