SECs Ripple Lawsuit Brings Ethereum’s Asset Status Under Scanner Again

Published by
SECs Ripple Lawsuit Brings Ethereum’s Asset Status Under Scanner Again

The SEC vs Ripple Lab lawsuit took an interesting turn on April 6th when Ripple counsel requested access to SEC’s internal documents discussing around Bitcoin and Ethereum’s Asset status. The judge granted the favor despite SEC protesting against it, leading many to believe that XRP might pass the test as well which made SEC declare ETH token as non-security.

SEC in its lawsuit has claimed that Ripple violated security laws by offering XRP tokens without registering it under Section 5 of the Securities Act. The regulatory agency claimed that XRP tokens are offered in the form of an investment contract making it liable under securities law.

However, Ripple’s legal counsel argued that the definition of ‘investment contract’ is not definitive and the fact that SEC allowed for Bitcoin and Ether transactions made them think XRP didn’t violate the securities law either.

Advertisement

Would Ether’s (ETH) Asset Status Come Under Scanner Again?

The SEC back in 2018 claimed that Ether is not seen as a security since the network is decentralized enough. There were a lot of discussions around Ether pre-mine and what made the SEC deem ETH token as non-security despite a pre-mine, to which William Hinman, the former SEC Director of Corporate Finance has said,

“Based on my understanding of the present state of ether, the ethereum network, its decentralized structure, we believe current offers and sales of ether are not securities transactions,”

Bitcoin is the only digital asset to be unanimously seen as an asset class due to its decentralized nature and the fact that every Bitcoin has been mined since the inception of the network back in 2009. With the ongoing SEC lawsuit, it seems ETH token’s non-security status could be brought into question by Ripple’s counsel to prove XRP token is not a security.

Advertisement

Where do SEC Stand with Investment Contract and Howey Test?

As per a super court ruling any asset that does not pass the Howey test qualify as an investment contract and thus registers under Section 5 of Securities Act 1933. Under the Howey Test, a transaction is an investment contract if:

  1. It is an investment of money
  2. There is an expectation of profits from the investment
  3. The investment of money is in a common enterprise
  4. Any profit comes from the efforts of a promoter or third party

Bitcoin is the only digital asset to have passed the Howey Test and thus it is considered as a non-security. Ether on the other hand was approved as non-security based on development over time. The SEC in 2018 suggested that even though ETH token couldn’t pass the Howey Test due to a pre-mine, it became decentralized with time to move out of the security category.

What to Expect Next?

The SEC’s obscurity around Howey Test has created controversies in the past, and at present, it has given Ripple an upper hand in the case.  Before the court proceedings in the SEC vs Ripple Labs began, many believed it would be an end of the road for XRP token, however, during the three court proceedings Ripple counsel has offered a stronger case than that of the SEC.

Advertisement

Share
Sunil Sharma

Sunil is a serial entrepreneur and has been working in blockchain and cryptocurrency space for 2 years now. Previously he co-founded Govt. of India supported startup InThinks and is currently Chief Editor at Coingape and CEO at SquadX, a fintech startup. He has published more than 100 articles on cryptocurrency and blockchain and has assisted a number of ICO's in their success. He has co-designed blockchain development industrial training and has hosted many interviews in past. Follow him on X at @sharmasunil8114 and reach out to him at sunil (at) coingape.com

Published by
Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Recent Posts

  • 24/7 Cryptocurrency News

XRP Ledger Rolls Out MPT Standard for Real-World Asset Tokenization

The XRP Ledger (XRPL) has launched the Multi-Purpose Token (MPT) standard, designed to simplify and…

October 1, 2025
  • 24/7 Cryptocurrency News

SEC Puts Crypto ETF Approvals On Hold Following U.S. Government Shutdown

The U.S. Securities and Exchange Commission has announced plans to streamline its operations amid the…

October 1, 2025
  • 24/7 Cryptocurrency News

Pi Network Adds DEX and AMM Features To Expand Pi Coin’s Utility

Pi Network has now added two new features to its Testnet. These are a decentralized…

October 1, 2025
  • 24/7 Cryptocurrency News

October Fed Rate Cut Odds Rise After Weak U.S. Labor Data, Bitcoin Surges

U.S. private payrolls unexpectedly fell in September, raising market bets that the Federal Reserve will…

October 1, 2025
  • 24/7 Cryptocurrency News

Hashdex Adds Cardano to Crypto Index Fund as ADA Gains SEC Listing Eligibility

Asset manager Hashdex has officially included Cardano in its Nasdaq Crypto Index U.S. ETF. This…

October 1, 2025
  • Bitcoin News

U.S. Treasury To Ease Tax Rule on Unrealized Bitcoin Gains, Aiding Saylor’s Strategy

The U.S. Treasury and IRS have released an interim guidance, which highlights plans to ease…

October 1, 2025