Pro XRP Lawyer Explains Why XRP is Not an Investment Contract, Urges Ripple to File Cross-Appeal

The case between Ripple and the SEC is far from over following the regulatory watchdog’s recent notice of appeal. The SEC is looking to challenge a court ruling that declared that the programmatic sales of XRP do not constitute security. As a result, the legal battle might continue until 2026 if it gets to the Supreme Court.

Meanwhile, a prominent legal expert has explained why institutional sales of XRP should not be considered an investment contract and why Ripple should file a cross-appeal before its deadline. On August 7, Judge Torres ordered Ripple to pay $125 million civil penalties for offering XRP to institutions, declaring that it constituted investment contracts.

XRP and Oranges, a Comparison

In a recent interview with Crypto Law, MetaLawMan, a prominent figure in the XRP community, asserted that Ripple’s XRP offering to institutions is not an investment contract.

MetaLawMan explained that the institutions bought XRP from Ripple at a discounted price, less than what it was selling for on retail exchanges, to sell and make a profit as a wholesaler. He noted that these entities did not share the profit with the issuing company, Ripple.

Here’s why I think @Ripple should file a cross-appeal. 👇 https://t.co/2nm0A2bnRt

— MetaLawMan (@MetaLawMan) October 9, 2024

Furthermore, he made a more relatable comparison, likening the XRP sales to oranges. He pointed out that the XRP institutional sales are like wholesalers buying oranges from the W.J. Howey company in 1946. He noted that the wholesalers are not getting into business with Howey and are not sharing the profits with the company. Rather, they are only receiving the commodity at a discount and making a profit by selling it to retailers.

“The difference between what they bought and sold it for is not an investment in the W.J. Howey company,” he said.

He added that anybody in their right mind would agree that it was simply a buy-and-sell transaction between the wholesaler and the retailers and not an investment contract.

Therefore, he remarked that in the case of Ripple, the entities were simply buying XRP at a discount to resell to retailers at a markup, hence they were not investing in Ripple and were not sharing any profit with the company.

Why Ripple Should File a Cross-Appeal

MetaLawMan continued by saying that if these entities wanted to invest in Ripple, they would have done so through the stock market, buying shares of the company which would translate to a securities transaction and not XRP.

However, he admitted that his analysis would get backlash because there is a contract that feels like there is an investment being made since Ripple is receiving money for the XRP purchase.

He concluded by urging Ripple to cross-appeal the court ruling because even though there were written contracts for the XRP sales, they were not investment contracts as they were simply selling XRP as a commodity to wholesalers that they profited from by selling to smaller buyers.

Meanwhile, Ripple had already hinted at a cross-appeal in a previous statement by its chief legal officer (CLO), Stuart Alderoty. Notably, Ripple has a week left, until October 17 to file a cross-appeal if it decides to.

The global crypto community is closely watching how the situation unfolds, as the outcome would play a major role in shaping the future of cryptocurrency classification.