In a series of tweets, Ripple’s CTO, David Schwartz, and Cardano founder Charles Hoskinson have contested SEC’s security classification of ADA in the ongoing regulatory crackdown.
Hoskinson and Schwartz’s objections to the SEC’s stance were prompted by tweets from an attorney known for supporting XRP, Bill Morgan.
Product Improvements Doesn’t Make it A Security, Said Bill Morgan
In recent tweets, Bill Morgan expressed his skepticism about the SEC’s argument. He raised concerns about the validity of the SEC’s claim, emphasizing that it overlooks the transformative nature of technological progress and innovation within the cryptocurrency industry.
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He compared the situation to how smartphones have evolved, with manufacturers constantly improving and adding new features to make them better.
Referring to a section of the SEC’s complaint, he highlighted that the agency’s argument is based on the notion that ADA is a security due to IOHK’s efforts to enhance the Cardano blockchain and released blogs.
Meanwhile, Bill stressed that updating the community about product improvements does not make that product a security. He added that this principle should apply to the continuous progress made within the Cardano Blockchain.
Furthermore, the SEC’s accusations mainly focus on trading ADA on Coinbase after it was listed in March 2021, rather than the initial coin offering (ICO) that occurred four years earlier, Morgan added.
Cardano Founder And Ripple CTO Respond To Recent Developments
Cardano founder Charles Hoskinson and Ripple’s CTO David Schwartz have weighed in on Morgan’s arguments, providing insight into the recent events. Hoskinson shed light on the ADA’s Initial Coin Offering (ICO) situation, providing much-need clarification to crypto enthusiasts.
He highlighted that the ADA’s ICO took place in Japan and did not entail the direct selling of ADA tokens but instead utilizing vouchers, targeted marketing, and pricing in Yen and Bitcoin.
Notably, Americans did not participate in the ICO, and Charles confirmed that the only purchase made by US citizens were exclusively related to secondary sales that occurred four years after the ICO.
However, this means that Americans acquired ADA solely through the secondary market and were not directly involved or connected to the original ICO in Japan.
In response to Hoskinson, Morgan added that based on the SEC’s location and nature of the operation, its power does not cover the ICO.
He emphasized that, despite this reality, the agency claims that ADA “became” security solely because it became available on US-based exchanges. Morgan criticized the illogical nature of this argument.
Ripple’s CTO, David Schwartz, also entered the conversation, drawing attention to the SEC’s perspective on ICO transactions and subsequent sales.
According to Schwartz;
I guess their argument must be the ICO was a securities offering, just not an SEC issue because of no US nexus. But then I thought it was their position that secondary sales were exempt. The ICO transactions didn’t take place on exchanges. So what’s the investment contract?
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