Ripple's Schwartz Says SEC Treated XRP Like a Security Despite Calling the Crypto 'Just Code'
Ripple CTO Emeritus David Schwartz and former SEC official Marc Fagel recently clashed on X over whether the SEC treated XRP as a security. The debate, which unfolded on July 13, centered on the SEC’s legal theory in its case against Ripple.
Fagel, a retired SEC regional director, argued that the case targeted Ripple’s sales practices, not XRP itself. He noted that the SEC recognized XRP as “just code” and not inherently a security. Under that view, the violation arose from Ripple selling XRP in circumstances that created investment contracts.
Schwartz rejected that characterization, calling it “a bizarre attempt to rewrite history.” While acknowledging the SEC conceded XRP was not a security per se, he argued that the agency’s broader legal theory still treated XRP as a security. The SEC claimed that holders of XRP reasonably expected profits from Ripple’s efforts, effectively linking the token to an investment contract.
Schwartz pointed to the SEC’s treatment of programmatic XRP sales through exchanges. In those blind transactions, buyers did not know whether Ripple or another party sold them the tokens. The SEC alleged those sales were securities offerings, which Schwartz argued cannot be explained simply by saying Ripple “sold it as a security.” Instead, the SEC used a broad Howey test, arguing that XRP holders joined a common enterprise and expected profits from Ripple’s work.
He also cited the SEC’s complaint and press release, which referred to XRP itself as a security and described Ripple executives as “security holders.” The court ultimately rejected that broad theory for programmatic sales, but Schwartz views that as evidence the court narrowed the agency’s argument.
Fagel defended the SEC’s interpretation, noting its partial victory in the case. He maintained that the criticism should focus on Ripple’s conduct, not an attempt to classify XRP itself as a security.
Schwartz, however, argued that the phrase “just code” did not settle the matter. The concession only established that XRP was not automatically a security due to its technical nature, not that the SEC’s securities theory depended solely on how Ripple sold it.
The dispute remains central to the case’s legacy. Future courts will determine whether the Ripple ruling is understood as a transaction-specific analysis or a broader rejection of the SEC’s attempt to link exchange buyers to Ripple’s efforts.