Ripple May Be Probed by US Regulators over Using XRP as a Security

Ripple, the Francisco-based foundation that is behind XRP and which is its largest holder, may be scrutinized by US regulators due to claims that it used the token as a security.

In 2018, a case was filed by Bradley Sostack claiming Ripple sold him XRP as an unregistered security, which Ripple described as having no merit and a breach of the statute of limitations.

Defending the position of his company, Ripple Labs CEO Brad Garlinghouse said, in an interview with CNBC, that XRP could not be used as a security for several reasons.

Referring to Sostack, Garlinghouse, said:

“it’s pretty outrageous. Here’s somebody whose held XRP for two weeks time, and he’s making some claims… Whether or not XRP is a security or not isn’t going to be dictated by one lawsuit.”

He also said XRP is entirely independent of the company, and therefore, token holders are not dependent on Ripple.

“I think it’s very clear that XRP is not a security. It exists independently of the company, Ripple. If Ripple, the company shut down tomorrow the XRP ecosystem would continue to exist. It’s an independent open source technology.”

Garlinghouse also stated that XRP holders have no ownership rights in the privately-owned Ripple, meaning that XRP tokens do not equate to tokenized equity shares within the company.

The third reason cited by Garlinghouse that XRP is not a security, is that Ripple has explicitly stated on many occasions that XRP is not an investment vehicle and that it is a digital asset that institutions can buy in order to complete international money transfers. He stressed that this does not fit the characteristics of a security.

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