Ripple Chief Technology Officer Emeritus David Schwartz has argued that the regulator repeatedly portrayed XRP itself as a security before courts rejected that position.

The discussion unfolded on X in response to former SEC attorney Marc Fagel, who argued that the agency's legal case centered on Ripple's sales of XRP rather than on the token itself.

"To prove a violation of Sec. 5, they needed to establish Ripple sold XRP as a security; and they say exactly that," Fagel wrote. "They might have to take that on when suing exchanges, but not here." 

Schwartz disagreed, accusing Fagel of oversimplifying the SEC's position.

"I agree. The problem is that you are falsely characterizing the argument they are making as a different argument they are not making."

He specifically challenged Fagel's assertion that "their only legal argument was that Ripple sold it as a security." "But that's not true," Schwartz said. "You are ignoring the entire thrust of their argument, their statements around it, and the pushback they got from the court. This is an attempt at completely rewriting history."

According to Schwartz, the SEC's public messaging and legal filings went well beyond alleging that Ripple conducted unregistered securities offerings.

"The complaint itself frequently refers to XRP itself as the security. The SEC's press release frequently refers to XRP itself as the security," he wrote.

Fagel acknowledged that the SEC's messaging may not have always reflected the nuances of its legal arguments.

"I'm not defending what I think was a lack of nuance in how the SEC framed its legal theories; it certainly felt like their points evolved over time," Fagel said. "But ultimately the Ripple case came down to whether it sold XRP as securities."

Schwartz countered that this framing overlooks what he considers one of Ripple's biggest courtroom victories.

"Right, but let's not forget that's because the courts soundly rejected the SEC's arguments (both to the courts and to the public) to the contrary," he wrote. "That was, correctly, understood to be a substantial victory at the time."

 A three-year anniversary 

The exchange revisits one of the central issues surrounding the SEC's 2020 lawsuit against Ripple. Three years ago, U.S. District Judge Analisa Torres ruled that Ripple's programmatic sales of XRP on public exchanges did not constitute securities transactions, while institutional sales of XRP to sophisticated investors did violate federal securities laws. 

The mixed ruling was widely viewed as a partial victory for Ripple.

The decision held that XRP itself is not a security and found that Ripple's programmatic sales of XRP on public exchanges did not constitute securities transactions. Judge Torres reasoned that retail buyers on secondary markets could not have known they were purchasing tokens from Ripple and therefore lacked a reasonable expectation of profits based on Ripple's efforts under the Howey Test.

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