Ripple and the U.S. Securities and Exchange Commission (SEC) have been locked in a legal battle concerning XRP’s security status. Recently, Ripple's Chief Legal Officer Stuart Alderoty criticized the SEC’s stance, arguing that the SEC has misapplied the Howey Test's “common enterprise” prong which determines whether an investment is a security.

He argued that common interest is not the same as a common enterprise. In particular, the SEC has claimed that all XRP holders over the past eight years have been involved in a common enterprise. The regulator also stated that the fungibility of XRP is part of the common enterprise, since all units of the crypto asset rise and fall together.

Ripple’s legal team vehemently disputed these claims, pointing out that the same could be said about an ounce of gold. Bill Morgan, a crypto lawyer, suggested that the SEC is attempting to surreptitiously argue a point that the Supreme Court had rejected in the 1946 Howey case.

It is clear that the SEC and Ripple disagree on the legal definition of “common enterprise”. The issue gains paramount importance as the Howey Test is used to assess whether an investment is a security or not. With clear considerations and interpretations of the term, the court will decide the fate of XRP.



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