Michael Arrington Questions SEC's Case Against Ripple and XRP, Says Howey Test Outdated and Ridiculous

Michael Arrington Questions SEC’s Case Against Ripple and XRP, Says Howey Test Outdated and Ridiculous

23 January 2021

in XRP

Reading Time: 3 mins read

TechCrunch founder Michael Arrington is giving his take on the U.S. Securities and Exchange Commission’s (SEC) case against Ripple.

In a new interview with Layah Heilpern, Arrington addresses the Howey test, which was established in a Supreme Court case and determines whether certain transactions qualify as investment contracts subject to securities laws.

According to the SEC, an investment contract exists when there is an investment of money in a common enterprise with a “reasonable expectation” that profits will be derived from the efforts of others.

Arrington says he believes the test is outdated and irrelevant in the digital age.

“Whether or not something is a security, even asking that question, just plays into the hands of the SEC. They want everybody using their definitions to decide what is and isn’t a security.

We buy cryptocurrencies with the hope of making money when they’re denominated in dollars. We do that because we don’t believe in dollars anymore. Is that a security? Maybe, I don’t know. It depends because it’s not just about, ‘Is it a security?’ and then the conversation is over. It’s, ‘Is it a security?’ and then if it is, which is an entirely a legal definition, then the SEC can really put the hurt on you.

I think it’s all securities in the sense of, we’re all buying these things because we’re trying to get into assets that will protect us from what the dollar is doing. But no, we look at the Howey Test, the hundred-year-old test that’s absolutely useless in a modern world. It’s ridiculous…

Do I think [XRP is] a security? From the point of view of the SEC, no. From the point of view of me, it just doesn’t matter. What’s a security and what isn’t a security is totally irrelevant and it really just comes down to whether you only allow rich people to trade an asset or do you allow everybody to trade an asset.”

Ultimately, Arrington says that he hopes the lawsuit can give cryptocurrency companies clarity on how they can legally operate in the US.

“I’m hoping that we get some regulatory clarity from this, but what I believe is the SEC wants Ripple dead to put a feather in their cap. Now, that’s pure speculation based on nothing other than speculation.

Also, the SEC is an entity that changes over time and is changing right now in terms of SEC chairs, and so what the SEC wants over time is largely going to be dependent on what the executive branch wants over time and the executive branch just changed so I have no idea… I believe the SEC probably wants us to go to trial and if it goes to trial we’ll see what happens but I don’t know.”

Arrington is the founder of Arrington XRP Capital, a digital asset manager that launched in 2017 and utilizes XRP to invest in blockchain technology.