- Renowned crypto lawyer Bill Morgan has recently questioned the claim that Ripple’s ODL agreement satisfies the Howey Test.
- After reviewing the 2020 ODL contract between Ripple and an Australian customer, Morgan asked how and where the expectation of profit arose from the contract.
- Morgan emphasized that the transaction was a transfer and not a transfer of title in the XRP or a sale.
Bill Morgan, a prominent crypto lawyer, has raised questions about Ripple’s ODL agreement and its compliance with the Howey Test. This article delves into his findings and their implications for the crypto industry.
Bill Morgan’s Review of Ripple’s ODL Agreement
Bill Morgan recently reviewed the 2020 ODL contract between Ripple and an Australian ODL customer. He questioned how and where the expectation of profit arose from the contract. His findings revealed that the contract involved XRP transfer into the purchaser’s agreed account with Bitstamp or another account and held on bailment, which the customer will hold as a bailee. Morgan emphasized that the transaction was a transfer and not a transfer of title in the XRP or a sale, describing it as “Committed XRP.”
Understanding the Transaction Process
The transaction becomes a sale once the ODL customer withdraws XRP from the bailment account. The withdrawal is converted into a USD purchase price at a market rate managed by an automated software system. Hence, upon withdrawal of the XRP, the ODL customer is deemed to have purchased XRP from the Ripple company at the market rate. The contract terms constrain the ODL customer from purchasing the Committed XRP for investment purposes or with an expectation of profit. The customer shall only use the Committed XRP for an ODL transaction on an exchange or through a party approved for ODL.
Implications of Breaching the Agreement
Morgan further noted that breaching the agreement term, which Ripple has the right to monitor, can result in the termination of the agreement and the return to Ripple of all unpurchased XRP in the bailment account.
Conclusion
Bill Morgan’s review of Ripple’s ODL agreement raises significant questions about its compliance with the Howey Test. The findings highlight the complexities of crypto transactions and the need for clear regulations. As the crypto industry continues to evolve, such discussions will be crucial in shaping its future.
