I spoke to ChatGPT about the Ripple-SEC case, and its prediction was surprising

The Ripple vs SEC dispute has been an emotional roller coaster for those invested in the case and those who are following it closely. Simply put, the SEC has told Ripple that its digital currency, XRP, is a security, and Ripple has responded by saying that it is not.

SEC charges Ripple and two of its executives with offering $1.3 billion worth of unregistered securities https://t.co/3VP23RpSyV

— U.S. Securities and Exchange Commission (@SECGov) December 22, 2020

Is your portfolio green? Check out the Ripple Profit Calculator

During this time, they argued in US courtrooms for what seemed like an eternity. Since a decision in this case has yet to be made, I’ve opted to consult our new AI buddy ChatGPT to share his views.

Chat with our educated AI friends

Q. How does the SEC determine whether a token is a security?

The Securities and Exchange Commission (SEC) determines whether a token is a security using the Howey Test, which was a test established by the Supreme Court in 1946. The test determines whether an investment contract is an “investment contract” and, therefore, a security under Securities Act of 1933.

The Howey test has four parts:

• This is an investment of money
• There is an expectation of profit from the investment
• The money investment is in the joint company
• Any profits come from the efforts of promoters or third parties

If a token satisfies all four branches of the Howey Test, it is considered a security by the SEC.

Q. What is the potential strength of the SEC case against Ripple?

• XRP Sales: The SEC has alleged that Ripple is offering $1.3 billion worth of unregistered XRP securities, which, if proven true, would be strong evidence that XRP is a security and Ripple is offering illegal securities.
• Investment Contract: The SEC maintains that XRP is a security under the Howey Test and that the purchase of XRP constitutes an investment contract. If the court finds that the purchase of XRP satisfies the four prongs of the Howey Test, that would be a strong argument in favor of XRP as a security.
• Investor Profit Expectations: The SEC maintains that XRP investors expect returns from their investment, which can be strong evidence that XRP is a security and that Ripple’s sale of XRP constitutes an illegal offering of securities.
• Control and Influence: The SEC could argue that Ripple exercises significant control and influence over the XRP Ledger, which would undermine the argument that XRP is decentralized.
• Precedent: The SEC has a strong track record of similar cases, and a ruling against Ripple could set a precedent for other cryptocurrencies and companies in the industry.

Q. The Howey test is the strongest point the SEC has used against Ripple, but how?

The Howey test is a strong point the SEC used in its case against Ripple because it is an established test for determining whether an investment contract is a security under the Securities Act of 1933. However, the test has limitations, and there are several ways it might fail in a case against Ripples.

Howey’s test is based on a 1946 Supreme Court case and may not fully capture the complexities of modern digital assets like XRP. This test is based on traditional investments, such as land or real estate, and may not apply fully to digital assets such as XRP.

This test is based on the notion of a common company, which may be difficult to prove in the case of XRP. Ripple argues that XRP is a decentralized digital asset and its value is independent of the efforts of third parties, making it difficult for the SEC to prove that XRP is a security.

The fourth prong of the Howey test is whether any gain comes from the efforts of the promoter or a third party. Ripple argues that profits come from appreciating the token’s value rather than from the efforts of promoters or third parties, making it difficult for the SEC to prove that XRP is a security.

The Howey test is not universally accepted. In other countries, the legal criteria for determining whether a token is a security could differ, meaning that even if the SEC wins the case, it may have no effect on Ripple’s operations outside the US.

Q. How is Ripple not a security?

XRP is not a security because it does not meet the criteria of the Howey test

It’s not an investment of money: XRP is a digital asset with its uses and can be used for many purposes, such as facilitating cross-border payments.

XRP is no ordinary company: It is decentralized, meaning that its value is independent of the efforts of a central, like Ripple, company.

No reasonable expectation of profit: XRP holders do not expect profit to be derived from the efforts of others, but instead expect to benefit from the appreciation in the value of the digital asset.

XRP holders do not expect a return on investment: It is not an investment in the traditional sense but rather a currency or commodity, and holders do not expect a return on their investment.

Q. Given the actions and motivations of Ripple and SEC in their ongoing lawsuits, could they be movie characters?

In the ongoing lawsuit between the SEC and Ripple, the SEC can be seen as the “protagonist” or “hero” of the story, representing investors’ interests and enforcing regulations to protect the public from fraud. In this sense, SEC can be likened to characters such as Captain America, who symbolizes justice and the fight for rule of law.

On the other hand, Ripple could be seen as the “antagonist” or “villain” of the story, challenging SEC regulations and arguing that XRP is not a security. In this respect, Ripple can be compared to characters like Loki, who is a fraud and often operates outside the law to achieve his goals.

Author’s note: There’s no way I could warn our guest attorney that this might not resonate with Ripple fans.

ChatGPT considers the win or lose implications for Ripple

Q. What is the likely impact of a Ripple win or loss?

Results of the SEC vs. Ripple can have a significant impact on the cryptocurrency industry and Ripple as a company.

A win for Ripple can be seen as a win for the crypto industry as a whole. It could also set a precedent for other cryptocurrencies and companies in the industry, making it more difficult for the SEC to regulate them as securities.

On the other hand, Ripple’s disadvantages can have the opposite effect. This can be seen as a major setback for the crypto industry and could lead to increased regulatory scrutiny and enforcement action against cryptocurrencies and other companies in the industry.

Ripple’s win can also have a positive impact on the value of XRP, as it means XRP is not considered a security, which will reduce regulatory risk for the token and increase its trading volume.

Ripple’s losses can lead to a decrease in XRP’s value because it means XRP is considered a security, increasing regulatory risk for the token and decreasing its trading volume.

If Ripple loses, it could also face significant fines and penalties, as well as a potential order to list XRP as collateral and refund investors. It can also lead to a decrease in confidence in the company and negatively impact its future prospects.

A win for Ripple can also boost confidence in the company and have a positive impact on its future prospects.

Realistic or not, this is XRP’s market cap in BTC terms

State of XRP

As of this writing, XRP is trading around $0.4, a significant drop from the previous highs above $1 it experienced prior to its slump. Bear in mind that XRP cannot be listed for trading on US exchanges when the lawsuit starts. As a result, the volume that XRP experiences comes from markets or exchanges outside the US

On Balance Volume (OBV) analysis on the daily period reveals that the asset is not experiencing major activity. The Relative Strength Index (RSI) line shows that XRP was in an uptrend at that time. However, the uptrend is not a strong trend, as the RSI line shows.

Source: Trading View

Our AI pals clearly have an idea about the Ripple (XRP) case, and the chat is a good deviation from price prediction and analysis. It also always indicates being ready to wait for a court decision, as various factors can affect the outcome.

Regardless of the decisions made, Ripple and XRP will inevitably be affected, and new paths will be set.