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Kevin O’Leary says XRP lawsuit is “a very bad idea”

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“I have no interest in investing in litigation against the SEC, that is a very bad idea.”

Kevin O’Leary, a popular investor known for his lead role on the TV show “Shark Tank,” said he would consult with the Securities and Exchange Commission rather than invest in litigation.

The billionaire investor, who recently became a spokesperson for crypto exchange FTX, called Ripple a “crypto cowboy.”

“I have no interest in being a crypto cowboy and making anyone unhappy with me because… I have a lot of real-world assets that I have already invested in and I have to stick with them.”

Rather than being a “coded cowboy,” O’Leary has been consulting with regulators to find out “what’s possible and what isn’t possible” and choosing litigation over a quick settlement seemed unthinkable to him.

“I have no interest in investing in litigation against the SEC, that is a very bad idea.”

The US Securities and Exchange Commission filed a complaint against Ripple in December 2020 alleging that the blockchain company and its executives sold $1.3 billion worth of XRP in an unregistered securities offering.

One of the main points of the lawsuit is whether XRP can be considered a security. Howie’s test says that an investment contract (guarantee) exists when these four conditions are met: money is invested in a joint venture with the expectation of profit to be obtained from the efforts of others.

A recent research report by JP Morgan said that if a judge determines that one or several points are not met, Ripple will win the lawsuit and if that happens “and resumes trading on major crypto exchanges like Coinbase, XRP is poised for significant adoption.”

The investment bank will host the JP Morgan Crypto Economy Forum on November 30 and Coinbase CEO Brian Armstrong and Chief Independent Director Fred Wilson will participate in a side chat.

While Ripple’s defense has argued throughout the lawsuit that XRP has a benefit rather than a security, SEC Commissioner Hester Pierce clarified in June what the SEC’s intention was when filing a complaint against a company for offering unregistered securities.

“When we think of crypto assets as security, what we do is we say that they are being sold as part of an investment contract. This does not mean that the asset itself must necessarily be a security. It means that it is being sold as security.”

The commissioner aka “Crypto Mom,” like other SEC officials, cannot openly discuss the ongoing lawsuit, but her words show that for the SEC, the lawsuit is not about the nature of XRP but about how the digital asset is marketed and sold.

In this regard, Judge Sarah Netburn recently ordered Ripple to provide more recordings of its meetings. The Securities and Exchange Commission will investigate whether individual defendants and Ripple CEOs are talking about XRP more than a stock rather than a digital token. This would strengthen the SEC’s case.

On the other hand, the judge ordered that a lot be explained through the RFA on many fronts, from XRP sales abroad to questions regarding the fair notice defense and whether the XRP ledger was “fully operating” when the sales took place in 2013. The Hogan lawyers presented their analysis About this big win for Ripple.

Ripple argues that the XRP ledger was fully functional when the sales occurred in 2013, which they would not be part of Howie’s test investment contract.

Defendants are also invested in a fair notice defense, claiming that the SEC failed to tell them in a timely manner that what Ripple and its executives were construing as an unregistered securities offering.

A short judgment on the fair notice defense could create a precedent that would likely weaken the SEC’c practice of regulation through enforcement in the digital asset space. At the moment, the lawsuit is in the middle of expert discovery.

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