On January 14, 2020, the Commodity Futures Trading Commission (CFTC) Chairman Heath Tarbert said that it is not clear whether XRP is a security or a commodity.
Speaking to American news outlet Cheddar, Tarbert stated:
“It’s unclear. Stay tuned, I’d say. Part of the issue is our jurisdiction we share with the SEC [Securities and Exchange Commission]. If it’s a security, it falls under their jurisdiction. If it’s a commodity, it falls under ours.”
Ripple’s Brad Garlinghouse has strongly argued that XRP is not a security, telling CNBC last week that the token exists independently of Ripple.
Garlinghouse observed that whereas some digital assets are traded as securities, as though one was buying and selling a company’s stock for a profit, those investing in XRP are doing so based on the hope of an increase in the XRP ecosystem’s network effect.
Ripple Chief Calls XRP Lawsuit ‘Outrageous’
Whether XRP is a security has been debated for a long time now. In 2018, several XRP investors filed a lawsuit against Ripple over the token, claiming the firm violated state and federal securities laws.
With the next hearing on XRP’s securities lawsuit set to happen tomorrow, Garlinghouse is calling the whole issue “outrageous.”
In an interview on January 13, 2020, the ripple chief argued that it’s very clear that XRP is not a security, given that it exists independently of Ripple the company.
He added that if Ripple the company shut down tomorrow, the XRP ecosystem would continue to exist as it is independent, open-source technology. Therefore, owning XRP doesn’t give away any ownership of Ripple equity.
Open court arguments in the XRP case are scheduled for January 15, and Ripple has been trying to poke holes into the case.
In September last year, Ripple filed a motion seeking to dismiss the suit. They argued that If XRP is actually a security, federal security regulations stipulate that the plaintiff should have filed his claim within 3 years of the initial offering of XRP, which took place in 2013.
Will XRP Be Recognized as a Security?
The January 15 hearing will almost certainly not put a definitive stop in the never-ending debate about whether or not XRP is a security.
The most likely scenario for Ripple is that Phyllis J. Hamilton, the chief district judge of the U.S. District Court for the Northern District of California, approves its motion and thus ends the lawsuit against XRP.
If the judge chooses to side with the plaintiff, the lawsuit will move forward, most likely inflicting more selling pressure on the XRP token.