Attorney Thien-Vu Hogan TAKES OVER! New Crypto Legislation Could Affect the SEC v. Ripple Lawsuit!.

But my best guess and what I think is the most likely case is that there is going to be a Baby Yoda. So cool. And how will you know if I'm just wrong? Which is doubtful. Or perhaps one of the other possible scenarios has passed. Look for something to be filed in the case by this Friday. If nothing is filed this Friday, my guess is that, well, let me just say there's something happening here, but what it is ain't exactly clear. If I'm really wrong on this, you want to start a garage band instead of doing the YouTube thing? Filed Friday, July 30. Wait, the SEC filed a notice of appearance of a new trial lawyer? Where's Jeremy? We need to do a legal briefs video. Stairway to heaven. Hello, this is attorney Tinboo Hogan here and welcome to Legal Briefs. It seems something was filed in the SEC versus Ripple case last Friday. So it does seem like the Ripple lawsuit will be moving forward for now. And while Jeremy is working on things today, we will be looking for something very exciting. And it's the new U.S. legislation defining a digital asset versus a digital asset security. And I'm going to tell you what the new legislation does with cryptocurrencies, which is actually really well thought out and smart. And then we'll be applying the law to XRP and finally talk about the effect the law will have if it passes before the end of the Ripple lawsuit. We've said since we started discussing crypto legal issues that the SEC has been systematically increasing attacks on cryptocurrencies, culminating in the SEC versus Ripple lawsuit, and that the problem is one that is needed to be fixed by Congress and not by the courts. And after Congress sitting on its hands for years, it seems it has finally come up with a game plan. In any case, let's take a look at the proposed legislation. And here it is. Right away, notice that the proposed legislation is an amendment of the 1934 Securities Act. This is a law that amends the current law, and it mends it by, among other things, making a distinction in defining cryptocurrencies in one of two ways. Section 101A defines a digital asset security, and this will be cryptos that are securities and subject to oversight by the SEC. Look at page four. A digital security is defined as a digital asset which provides the holder of the digital asset with any of the following rights. And then if you see Roman numeral one through four, it basically is defining what you traditionally think of as a security. Rights to profits, interest or dividends, voting rights. Here, in an interesting twist, this definition of digital asset is basically what former director Hinman was talking about in his speech that he was probably deposed about last week. The law defines a security asset as a digital asset where the platform is not fully built out and for which the money from the sales fund the development of the proposed service goods or platform of the issuer. And that is it. If the digital asset does not act like a traditional security, like a share of a company and the money from the sale is not used to build the digital platform, then it's not a digital security and not subject to regulation by the SEC. So next, what you're really waiting for. Let's apply this law to XRP. The first part of the test is whether XRP has any hallmarks of a traditional security. If you own XRP, do you have any equity interests in the voting rights in Ripple? No, absolutely not. That's an easy one. The second part of the test is whether the service good or platform was wholly operational at the time of the sale or is the money from the sale used to fund the development of the platform. This part of the test is a little bit more complicated, but certainly the XRP ledger, et cetera, which is the base of the Ripple platform is and has been wholly operational for some time. You can make an argument that certain of the newer products that Ripple's has deployed in the last couple of years are new and XRP sales money was used to develop them. But Ripple's business is the software that surrounds the platform, but does not seem to be the kind of thing that the legislation envisions as a digital security. So it certainly seems that if this legislation passes, XRP is not a digital security asset and not subject to regulation by the SEC. But let's imagine this legislation passes and becomes law in a month or two and the SEC versus Ripple lawsuit is still going on. Now, are you wondering what I was thinking of? Can the law apply retroactively even though Ripple was already sued? Well, the United States Supreme Court gave us an answer. In 1994, in the case of Landgraf versus USI film products, the Landgraf case was a sexual harassment case, but it involved application of a change of law during the pendency of litigation. And this provides a framework for our XRP analysis. First in our analysis is whether the retroactive application of the law would be unconstitutional. The U.S. Constitution says in, let's look here, no state shall pass any ex post facto law or law impairing the obligation of contracts. So ex post facto is Latin for after the fact. And the drafters of the Constitution were very concerned about a central government targeting people by passing laws that made something illegal after the fact. But over time, the courts have held that ex post facto clauses really applies in only two situations. One, to criminal statutes, and two, where the after the fact law would impose greater civil penalties on the subject. So here, in applying the new law to Ripple situation, we pass those two tests because one, the law is not criminal. None of the defendants were charged with a crime. And also two, in this specific situation, the law would not create a greater civil penalty. In fact, it would probably lead to the end of the lawsuit. And that leads to the next part of the analysis, which is to decide if Congress intended the legislation to apply retroactively. And from my review of the legislation, I didn't see that addressed. And when that is the situation, the Landgraf case tells us to look at the effect that statute will have. If the law increases the party's liability for past conduct, it's not applied retroactively. And some parts of this law would increase liability, especially for exchanges. But as to whether XRP is a security or not, as we know from the analysis earlier, under this law, XRP, especially the current form of XRP, is not a digital asset security. So in that case, the This is especially true because as you can see, the legislation is very smart that it only changes the definition of what a security is in the crypto space. The law doesn't change any of the reporting or registration requirements for securities in any way. And that is consistent with retroactive application because you are not changing substantive obligations, but only definitions. So our conclusion from applying this pending law to this SEC versus is that the courts would likely apply the new law retroactively. Certainly, the last few years of Ripple's business practices, XRP would be defined as just a digital asset and not a digital asset security and therefore not subject to SEC regulation. This would mean that XRP is a digital asset and subject to regulation by the Commodity Trading Commission and not the SEC. And large parts of the SEC lawsuit would actually become moot. This bill was just introduced, and we don't know the time frame for passage or if it will pass, but it certainly clarifies digital assets in a common sense way. Thanks for watching and have a great day.