Important question for the XRP community: Does the SEC chairman believe XRP is a security?

There is no doubt that the outcome of Gary Gensler’s congressional testimony yesterday before the House Financial Services Committee may be considered a very positive development for Ripple, XRP investors, and the broader crypto ecosystem. Gensler was asked challenging questions right away, which he tremblingly sidestepped to avoid providing any regulatory clarification.

Gensler only stammered in reaction to hard inquiries from Committee Chairman Patrick McHenry, Warren Davidson, and Tom Emmer. He was also partially trembling and had broken speech. For the XRP community, Davidson’s question on whether he considers XRP security was the most crucial of the day.

Interestingly, Gensler resisted answering yes or no. Instead, the SEC chairman stated that there are ongoing legal proceedings about whether XRP is a security and that there are talks about it in the SEC. Gensler answered, “We are in court, and [there are] active discussion and litigation on that matter.”

McHenry made a compelling case for Ripple’s fair notice defense when he badgered the SEC chairman with multiple follow-up inquiries to force him to declare Ethereum (ETH) as a security or commodity. Someone should not be required to “speculate on the meaning of laws,” according to the fair notice defense.

Although McHenry toughened his tone, Gensler continued to sidestep the issues. “I am asking you a specific question, chair Gary Gensler. I said this in private. This should be no shock. I am asking this question. Is Ether a commodity or security?”

It depends on the facts and law, was Gensler’s sole response. An irate McHenry then stopped the SEC chairman, asking, “I am asking you about the facts and the law sitting in your seat and the judgment you are making.” Gensler replied only that he can’t “prejudge.”

McHenry responded that he takes over 50 enforcement actions, including one against Ripple, to accomplish this precisely. “Do you think this provides safety and soundness, does it provide consumer protection, […] I think ‘No’ should be a very simple answer for you here. That uncertainty is bad”, Mchenry said.

He added that the group intends to end the ambiguity and establish a solid legal foundation. All of these ought to work in Ripple’s favor.

Ripple already had one of the strongest arguments with the Fair Notice, and it possibly got even better since yesterday. It’s unlikely that Judge Analisa Torres missed the hearing.

This is likely supported by the fact that the committee’s Republicans wrote a letter to SEC Chairman Gensler accusing him of attempting to pressure trading platforms for digital assets to “come in and register” under his fictitious registration procedure. Foreign Policy Counsel at Ripple Susan Friedman offered the following insight: “A direct rebuke by @FinancialCmte to Chair Gensler’s (false) claim that crypto markets are suffering from a lack of compliance rather than a lack of clarity. The only entity to blame for the lack of registrants is the SEC itself.”

Warren Davidson has also submitted a bill that calls for the SEC to be restructured and Gensler to be fired: To correct a long series of abuses, I’m introducing legislation that removes the chairman of the Securities and Exchange Commission and replaces the role with an executive director that reports to the board where all authority would reside.


XRP/USD 4-hour chart | Source: TradingView

At the time of publication, the price of XRP was $0.4967 and was declining due to a market-wide correction.

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