Charles Hoskinson, the creator of Cardano, has jokingly reacted to the SEC’s appeal against Ripple in their ongoing litigation.
While reacting to Ripple’s CLO Stuart Alderoty’s comment, Hoskinson humorously asked Alderoty whether Ripple is ready to replace the Howey Test with a Ripple Test.
SEC’s Filed An Appeal Against Ripple
In August, US District Judge Analisa Torres ordered Ripple to pay a fine of $125M as a civil penalty, which was a small fraction of the $2 billion the US Securities and Exchange Commission (SEC) has slammed Ripple.
However, on Wednesday, October 2, the US SEC filed an appeal notice, stating that it wishes to contest Judge Torres’ decision in the Ripple lawsuit.
The SEC holds that Torres’ decision goes against the Supreme Court’s longstanding precedents and established securities laws.
Ripple’s CLO Stuart Alderoty Reacted To SEC’s Appeal
Yesterday, Stuart Alderoty, Ripple’s CLO, expressed his disappointment about the SEC’s move in an X post. According to Alderoty, Ripple is ready to prove that the SEC decision is “irrational” and “misguided” in the US Court of Appeals for the Second Circuit.
He mentioned that the district court had already rejected the SEC’s claim that Ripple acted recklessly and that there were no allegations of fraud, victims, or losses.
Alderoty added that Ripple might file a cross-appeal, which will allow the firm to overturn any unfavorable ruling from Judge Torres potentially
Cardano Creator Charles Hoskinson Humorously Reacted
The Ripple’s CLO’s X post attracted a humorous reaction from the Cardano creator, Charles Hoskinson. In this comment, Hoskinson jokingly asked Alderoty if he was “ready to replace Howey with the Ripple Test.”
Howey test, which originated from a 1946 Supreme Court case between the SEC and W.J. Howey Co., is the legal precedent used to determine whether certain transactions qualify as investment contracts under US securities law.
According to the Howey Test, a transaction must meet four criteria before it can be categorized as an investment contract. They include (investing money) in a (common enterprise) with the (expectation of making profits) directly from the (efforts of others).
During the litigation, the SEC used the test to argue that Ripple violated federal laws by selling XRP as a security to investors. Interestingly, the district judge also applied the test to specific facts of the case.
Specifically, the Judge found that Ripple’s programmatic sales and other distributions did not meet the third and fourth criteria of the Howey Test.
According to her ruling, retail investors were not relying on Ripple’s efforts to make profits from their XRP investments. Consequently, she ruled that these transactions do not constitute securities.
Birth Of The Ripple Test
In this case, the SEC v. Ripple lawsuits could lead to the “Ripple Test,” potentially determining the future classification of crypto assets. Consequently, Hoskinson jokingly suggested that this Ripple Test could replace the longstanding Howey Test.
