Now there's probably some silliness in the fact that if Alice creates a token and sells it to Bob, it's an investment contract, but if Alice creates a token sells it to Mark the middleman who then sells it to Bob it's not an investment contract and therefore not covered by the SEC. But this really comes down to how Federalist society wing of judges have changed Constitutional law.
Up until about 20 years ago, if Congress passed a law that wasn't very well defined or left a loophole open, courts were generally willing to consider the original intent of the lawmakers and interpret the law relative in a commonsense way even if it went against the specific language used by Congress. Federalist Society judges would argue that courts should generally only apply the law as it's actually written (i.e. an investment contract requires an actual legal contract). The argument is that Congress is around and still exists and perfectly free and able to update the existing laws if they're unhappy with the wording or oversight of previous legislation.
This is a fundamental disagreement in Constitutional law. Should courts use commonsense interpretation of the meaning of the laws or should Congress itself, as the actual elected representative, be responsible for updating laws and courts just enforce the plain meaning. It's also tinted by the fact that Congress today has become hopelessly gridlocked and obstructionist, and we're largely incapable of passing sweeping legislation. So generally if you're not a fan of big government or regulation, you're going to be biased towards one view and vice versa.
Judge was a former Democratic politician and an Obama appointee, in NY. Probably not Federalist.
>Should courts use commonsense interpretation of the meaning of the laws
Whose commonsense? commonsense isn't common.
For XRP, there is no explicit rights to profits via the efforts of others via the instrument so you then have to look at the agreement made via the contract between the purchaser and the issuer.
On page 18 of the ruling it outlines this for Institutional Investors:
'''The third prong of Howey examines whether the economic reality surrounding Ripple’s Institutional Sales led the Institutional Buyers to have “a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”... Based on the totality of circumstances, the Court finds that reasonable investors, situated in the position of the Institutional Buyers, would have purchased XRP with the expectation that they would derive profits from Ripple’s efforts. '''
However for "Programmatic Buyers" on exchange the ruling said:
'''Having considered the economic reality of the Programmatic Sales, the Court concludes that the undisputed record does not establish the third Howey prong. Whereas the Institutional Buyers reasonably expected that Ripple would use the capital it received from its sales to improve the XRP ecosystem and thereby increase the price of XRP, Programmatic Buyers could not reasonably expect the same.'''
So because there is both no expectation of profits tied to the managerial efforts of others, nor from the contract made by a buyer on exchange, the court ruled the 3rd prong does not apply. Stocks fail the first part of this.
I don't get this - why were Programmatic Buyers buying it then? I would agree if Programmatic Buyers were buying XRP to immediately use to then buy pizza or whatever, but nobody in cryptoassets does this.
Every individual person buying XRP seems to me to be buying it for the same reason as the institutional investors.
Then don't comment on it