WEBVTT - What is the Howey Test and Why Does It Matter In Crypto? 0:00:02.480 --> 0:00:05.480 This is Bloomberg Crypto, a daily Bloomberg I Heart podcast, 0:00:05.680 --> 0:00:08.559 and I'm Stacy Marie Ishmael, Managing editor of Crypto for 0:00:08.600 --> 0:00:26.920 Bloomberg News. It's Tuesday, November eighth. One of the bigger 0:00:26.920 --> 0:00:29.200 fights in crypto right now is over the definition of 0:00:29.200 --> 0:00:32.599 a security, what counsels the security, who gets to decide 0:00:32.600 --> 0:00:36.000 what counts, and of course who gets to regulate once 0:00:36.040 --> 0:00:40.239 that decision is made. This isn't just about semantics. The 0:00:40.320 --> 0:00:44.159 answer to these questions affects trillions of dollars of assets 0:00:44.200 --> 0:00:49.760 in the United States, including and increasingly crypto. In December, 0:00:50.680 --> 0:00:54.160 the SEC accused Ripple Labs, the issuers of the Ripple token, 0:00:54.680 --> 0:01:00.000 of having conducted quote an unregistered ongoing digital assets secure 0:01:00.120 --> 0:01:05.160 he's offering, and offering that raised one point three billion dollars. Ripple, 0:01:05.720 --> 0:01:09.000 of course, did not agree with the SEC's assessment, and 0:01:09.080 --> 0:01:13.200 that fight is still ongoing. Most recently, Ripple asked the 0:01:13.200 --> 0:01:18.320 courts involved to dismiss the SEC's complaint entirely, among other things, 0:01:18.640 --> 0:01:22.160 on the basis that it's token x RP does not 0:01:22.360 --> 0:01:26.120 count as a security. So who's right and what are 0:01:26.160 --> 0:01:29.559 the consequences either way? Here to explain a Bloomberg reposts 0:01:29.560 --> 0:01:32.400 as Matt Robinson and Chris Dolmac an attorney at law 0:01:32.560 --> 0:01:37.039 Liz Davis. Hey, listeners, I'm Dust the one Drett from 0:01:37.040 --> 0:01:40.840 the Bloomberg Crypto podcast team. The U S Security is 0:01:40.840 --> 0:01:44.120 an exchange commission is one case that could impact another 0:01:44.160 --> 0:01:48.160 case we mentioned in today's show involving Ripple Labs. The 0:01:48.280 --> 0:01:50.960 U S. District Court has ruled at the company in question, 0:01:51.280 --> 0:01:55.920 Library was selling its token as an unregistered security. In 0:01:55.920 --> 0:01:59.440 a response on Twitter, Library said that it's not giving up, 0:01:59.680 --> 0:02:03.360 so the ruling could be appealed. We recorded this show 0:02:03.480 --> 0:02:06.800 before the news broke, which is why it is not mentioned. 0:02:07.480 --> 0:02:10.440 For more information about the Library decision, go on over 0:02:10.440 --> 0:02:21.639 to Bloomberg Law. Now back to our show, Matt, Liz, 0:02:21.800 --> 0:02:24.079 Welcome to the show. We don't often get to talk 0:02:24.120 --> 0:02:27.280 about Florida on the show, but today we're gonna get 0:02:27.280 --> 0:02:29.240 to talk about Florida. And the reason that we're going 0:02:29.280 --> 0:02:31.679 to talk about Florida is because of this dude who 0:02:31.840 --> 0:02:34.960 was not exactly an international amount of mystery, but certainly 0:02:35.040 --> 0:02:39.280 quite a character, a citrus farmer, a person who attempted 0:02:39.320 --> 0:02:43.720 to run for Florida governor named William John Howe. He 0:02:43.840 --> 0:02:47.600 died in and yet we invoke his name when we're 0:02:47.600 --> 0:02:51.160 talking about assets in twenties twenty two, Matt, why is 0:02:51.200 --> 0:02:54.799 this well Bill Howie. Yeah, as you said, he got 0:02:54.840 --> 0:02:58.919 to Florida around Uh. Prior to that, he was an 0:02:58.919 --> 0:03:02.720 interesting guy. He sold life insurance that's sixteen. He actually 0:03:02.800 --> 0:03:06.760 developed land in Oklahoma tied to railroads. He also started 0:03:06.760 --> 0:03:09.919 a Howie car. I think it's about sold about seven 0:03:10.000 --> 0:03:13.400 of them, so that didn't last. And then he found 0:03:13.440 --> 0:03:17.400 his way to Florida around the nineteen tens, started buying 0:03:17.480 --> 0:03:21.680 up land, you know, planting citrus groves and starting building 0:03:21.720 --> 0:03:24.320 that out. The way he was funded that, in part 0:03:24.400 --> 0:03:27.840 was by bringing these rich investors from the North. He'd 0:03:27.919 --> 0:03:31.240 kind of schmooze them at his hotels showing these orange grows. 0:03:31.600 --> 0:03:36.000 He became very wealthy. His mansion is still there. Uh 0:03:36.000 --> 0:03:40.000 if actually it's a it's a national historic place. You 0:03:40.000 --> 0:03:42.080 can also get married there, I think, if you'd like. 0:03:43.080 --> 0:03:46.200 But why do crypto people care about him? So so 0:03:46.360 --> 0:03:49.040 part of the way he made his wealth was the 0:03:49.080 --> 0:03:52.520 way he funded this orange growth business. So the idea 0:03:52.600 --> 0:03:54.440 is that he would say, hey, I'm gonna sell you 0:03:54.520 --> 0:03:57.280 this land. But part of that is, I'm going to 0:03:57.400 --> 0:04:01.000 develop it for you. So you gave me money now, 0:04:01.560 --> 0:04:03.880 and then you know, I'll develop, I'll sell it, and 0:04:03.880 --> 0:04:06.640 then you'll get a return on that investment. Now it 0:04:06.640 --> 0:04:08.880 starts to sound more like you know, a security something 0:04:08.880 --> 0:04:10.560 that like you give someone money and then there's an 0:04:10.560 --> 0:04:12.960 expectation that you're going to get some profit back. So 0:04:13.040 --> 0:04:15.480 he did this for years, and then the SEC sued 0:04:15.560 --> 0:04:19.280 him saying well, that's that's our universe, that's our world, Um, 0:04:19.320 --> 0:04:22.080 you should be registered with US. Goes all the way 0:04:22.120 --> 0:04:26.239 up to the Supreme Court, and that decision in goes 0:04:26.360 --> 0:04:29.760 through you know, sort of these steps to say, okay, 0:04:29.920 --> 0:04:33.160 when does something When does this exchange of money become 0:04:33.200 --> 0:04:39.839 a security? And Liz, it's now we're two. Why are 0:04:40.160 --> 0:04:45.880 both US regulators and cryptal lawyers of all stripes still 0:04:45.920 --> 0:04:50.320 fighting about this today? The how we test is sort 0:04:50.320 --> 0:04:53.479 of the standard that the SEC looks to uh in 0:04:53.560 --> 0:04:57.800 determining whether something constitutes an investment contract um. And if 0:04:57.839 --> 0:05:00.640 it's an investment contract, then it needs to be registered 0:05:00.640 --> 0:05:04.280 with the SEC as a security. So generally speaking, like 0:05:04.320 --> 0:05:08.599 all securities like stocks, bonds, investment contracts that are offered 0:05:08.640 --> 0:05:11.640 in the United States, must be registered with the SEC, 0:05:11.760 --> 0:05:15.240 subject to some exceptions. Um, you know, registration with the 0:05:15.279 --> 0:05:18.600 SEC is to make sure that it's for investor protection right, 0:05:18.720 --> 0:05:22.040 to make sure that investors are sold investments that include 0:05:22.120 --> 0:05:25.599 all of the appropriate disclosures and are subject to regulatory 0:05:25.600 --> 0:05:29.160 scrutiny to protect investors. So, as Matt discussed, you know, 0:05:29.200 --> 0:05:32.520 the how we test is sort of the standard test 0:05:32.640 --> 0:05:36.000 for determining whether and offering is an investment contract and 0:05:36.040 --> 0:05:39.520 therefore security and that needs to be registered. And there 0:05:39.560 --> 0:05:42.520 are just sort of parallels that the crypto industry is 0:05:42.520 --> 0:05:45.600 looking at in terms of the initial coin offerings, how 0:05:45.640 --> 0:05:49.359 they were being offered to the wide audience, the wide public, 0:05:49.560 --> 0:05:53.160 you know, who are the investors, and the parallels are 0:05:53.160 --> 0:05:56.000 being drawn from there to see whether you know, those 0:05:56.040 --> 0:05:58.919 offerings in those initial coin offerings or for a blockchain 0:05:58.960 --> 0:06:03.599 project fundraising that's done there constitutes an investment contract that 0:06:03.640 --> 0:06:07.479 would been under Howie when you say like registering with 0:06:07.560 --> 0:06:09.960 the SEC, do you just like send in the postcard 0:06:10.640 --> 0:06:12.320 to the regulators And you're like, I'm going to do 0:06:12.360 --> 0:06:15.240 a thing, Like what does that mean? In practice? Sure? No, 0:06:15.560 --> 0:06:18.200 registration means you know, you have to fill up the 0:06:18.240 --> 0:06:21.520 requisite forms there are a law of disclosures that need 0:06:21.560 --> 0:06:25.240 to be made to the SEC. And so it is 0:06:25.360 --> 0:06:28.880 a lengthy process, but one that the SEC, you know, 0:06:29.000 --> 0:06:32.640 would expect folks who are offering investment contracts, whether they 0:06:32.640 --> 0:06:37.240 are orange Grows, interest in orange Grows or cryptocurrency, for 0:06:37.279 --> 0:06:40.719 them to comply with. Now that all sounds you could 0:06:40.800 --> 0:06:43.800 argue reasonable. It might be work, it might be expensive, 0:06:43.920 --> 0:06:46.359 or is it going to get paid? Why then, do 0:06:46.440 --> 0:06:50.880 people object to having their thing be considered a security 0:06:51.160 --> 0:06:54.040 for the purposes of the how we test? I think 0:06:54.080 --> 0:06:57.719 because it's a fact and circumstances test. Right. When you 0:06:57.760 --> 0:07:00.960 say facts and circumstances, what does that mean? It depends 0:07:01.040 --> 0:07:04.200 on what the how the token was being offered, what 0:07:04.320 --> 0:07:07.880 the situation was, you know, the context in which it 0:07:08.000 --> 0:07:11.520 was distributed to the public and may be made available 0:07:11.600 --> 0:07:14.200 to the public. And I think it depends on who 0:07:14.240 --> 0:07:17.679 the promoter was or the entity was that was offering 0:07:17.720 --> 0:07:21.080 to it, what disclosures they may what comments did they 0:07:21.080 --> 0:07:24.200 make with respect to the problems that the how these tests? 0:07:24.560 --> 0:07:27.760 Was there an expectation of profit that was being made 0:07:27.800 --> 0:07:31.320 known to those potential purchasers that were going to invest 0:07:31.360 --> 0:07:34.520 in the security? And Matt why is this such a 0:07:34.520 --> 0:07:38.080 big deal right now? It's such a big deal because 0:07:38.120 --> 0:07:39.880 once something is a registered there's a lot of other 0:07:39.880 --> 0:07:42.880 things that need to take place. You're selling a security 0:07:42.960 --> 0:07:45.800 and it trades on an exchange, that exchange needs to 0:07:45.800 --> 0:07:48.560 be traded, right, and then if it's security, you know, 0:07:48.680 --> 0:07:51.520 like how do you protect inside information so that your 0:07:51.520 --> 0:07:54.000 employees don't trade against So there's just like it opens 0:07:54.080 --> 0:07:57.640 up a whole bunch of different regulatory hoops people need 0:07:57.680 --> 0:07:59.840 to jump through. And I think part of the reason 0:08:00.040 --> 0:08:01.920 there's been reluctance in the industry is that the whole 0:08:01.920 --> 0:08:05.760 ethos is to you know, we're we're against institutions where 0:08:05.800 --> 0:08:08.560 we're trying to you know, do things ourselves and not 0:08:08.640 --> 0:08:12.440 to have some sort of intermediary. So this this law 0:08:12.680 --> 0:08:15.280 or this test from you know, the forties is kind 0:08:15.320 --> 0:08:17.760 of hampered it because the way that it was written 0:08:17.840 --> 0:08:19.720 is to sort of encompass a lot of things so 0:08:19.760 --> 0:08:23.840 that the investing public has someone you know, overlooking things 0:08:23.880 --> 0:08:26.120 to make sure that people are doing the things that 0:08:26.240 --> 0:08:29.800 say they're going to do. Is there anything to the 0:08:29.840 --> 0:08:33.720 criticism that you know, these sorts of registration steps can 0:08:33.880 --> 0:08:36.880 hamper activity in some way, like have there been examples 0:08:36.920 --> 0:08:42.320 in other assets of concern about the applicability of these 0:08:42.320 --> 0:08:46.320 sorts of tests. So yeah, I mean I think if 0:08:46.320 --> 0:08:49.280 you look, you know, I used to be at the CFTC, 0:08:49.840 --> 0:08:53.760 and you know, foreign currency for X was sort of 0:08:53.800 --> 0:08:55.959 the tool of choice we used to say over there 0:08:56.000 --> 0:08:59.080 in terms of fraud, right. It was just another method 0:08:59.120 --> 0:09:02.560 in which folks who wanted to defraud people out of 0:09:02.559 --> 0:09:05.920 their money was being used. And you know, there was 0:09:05.960 --> 0:09:08.920 provisions added pursuing too, don Frank that gave the CFTC 0:09:09.120 --> 0:09:13.480 jurisdiction over certain leveraged and finance margins transactions for retail 0:09:13.960 --> 0:09:16.720 spot for X, And so you know, that's a similar 0:09:16.760 --> 0:09:19.080 parallel if you want to look at that. The concern 0:09:19.160 --> 0:09:22.439 I from the regulators is that there are bad actors 0:09:22.480 --> 0:09:25.240 that are out there, right, And I think it's fair 0:09:25.280 --> 0:09:27.240 to say that a lot of folks in the crypto 0:09:27.280 --> 0:09:30.000 industry recognize there are bad actors out there, and they 0:09:30.000 --> 0:09:32.600 don't want them, you know, in the industry because it's 0:09:32.600 --> 0:09:35.640 giving them a bad name. But unfortunately, because we're in 0:09:35.720 --> 0:09:38.400 this period of regulation by enforcement where we don't have 0:09:38.440 --> 0:09:41.160 regulatory clarity, you know, a lot of the laws who 0:09:41.160 --> 0:09:43.880 are being made based upon you know, the fraud that 0:09:43.840 --> 0:09:46.840 that's out there with crypto being used as that vehicle. 0:09:47.480 --> 0:09:49.840 It's just as a sort of a final question obviously, 0:09:49.920 --> 0:09:51.720 like the question of does the how we test apply 0:09:51.920 --> 0:09:55.280 is like very large and very complicated. But are there 0:09:55.320 --> 0:09:59.120 any other kind of similar questions that folks are encountering 0:09:59.360 --> 0:10:05.679 as they try to fit crypto into existing regulatory models? Sure? 0:10:05.800 --> 0:10:08.320 I mean, I think right now, because we don't have 0:10:09.160 --> 0:10:13.400 a central you know, regulator that oversees all the financial 0:10:13.520 --> 0:10:16.560 markets and the banking systems like some other countries do, 0:10:18.200 --> 0:10:20.360 one of the biggest questions that we're seeing is, you know, 0:10:20.520 --> 0:10:23.079 is it a security under the SEC's perview or is 0:10:23.120 --> 0:10:27.079 it a commodity under the CFTCS perview. You know, hopefully 0:10:27.120 --> 0:10:29.160 some of the legislation that's pending right now, that bi 0:10:29.200 --> 0:10:32.880 partisan legislation that's pending might get to, you know, drawing 0:10:33.000 --> 0:10:35.480 some lines between the two of that. But I you know, 0:10:35.679 --> 0:10:38.120 my mind, in addition to the how we test, I 0:10:38.240 --> 0:10:40.840 think the common question that we see all the time 0:10:41.000 --> 0:10:44.120 is just like is this a security? Is this a commodity? 0:10:44.440 --> 0:10:46.600 Or you know, how do I structure my projects such 0:10:46.679 --> 0:10:49.760 that I fall within the jurisdiction of the CFTC as 0:10:49.800 --> 0:10:52.800 opposed to the SEC or vice versa. Got it. Well, 0:10:53.160 --> 0:10:56.040 thank you both, really appreciate you taking the time. Thank you. 0:10:57.440 --> 0:11:00.160 Coming up, we'll be talking to bloombergerpors Crystal Mac how 0:11:00.240 --> 0:11:03.400 one crypto firm is fighting the SEC. It's the SEC 0:11:03.800 --> 0:11:19.360 versus Ripple. We'll be right back. We just heard from 0:11:19.360 --> 0:11:22.040 Bloomberg Reports and Matt Robinson and from attorney at law 0:11:22.080 --> 0:11:24.599 Elizabeth Davis, and now I'm happy to be able to 0:11:24.679 --> 0:11:28.840 introduce Bloomberg reporter Chris Dolmetsch on how one crypto firm 0:11:28.960 --> 0:11:32.439 is fighting the SEC. Chris, welcome to the show. Thank you. 0:11:32.800 --> 0:11:35.160 So when we talk about this SEC case, we're talking 0:11:35.240 --> 0:11:39.040 about the folks at Ripple Labs, who are I would 0:11:39.080 --> 0:11:43.720 not say they're not super pleased with the SEC. What's 0:11:43.760 --> 0:11:47.040 this fight about? So, the fights about whether they should 0:11:47.080 --> 0:11:51.160 have registered x RP as a security right, which would 0:11:51.160 --> 0:11:54.000 have obviously required them to put in a lot of 0:11:54.720 --> 0:11:59.760 registration materials UM material information about their business for investors 0:11:59.840 --> 0:12:02.400 that investors can use to decide whether to invest or 0:12:02.440 --> 0:12:06.679 not UM. You know, it's a common obviously practice among 0:12:07.160 --> 0:12:10.960 public companies and things like that, who are obviously come 0:12:11.040 --> 0:12:13.400 under the purview of the SEC. But when it comes 0:12:13.480 --> 0:12:17.800 to crypto, they kind of feel I think not just Ripple, 0:12:17.880 --> 0:12:19.319 but I think a lot of these people. If you 0:12:19.360 --> 0:12:23.000 look at the Bitmax prosecution, I think you understand that 0:12:23.160 --> 0:12:27.120 they feel that they are not a traditional company that 0:12:27.280 --> 0:12:29.920 needs to bide by those rules, that that crypto is 0:12:30.000 --> 0:12:33.040 really a commodity that can be traded freely. It is 0:12:33.120 --> 0:12:36.520 determined by the market price rather than UM. You know 0:12:36.640 --> 0:12:39.760 the efforts of others. How long has this fight been 0:12:39.800 --> 0:12:43.280 going on. It's been going on since I believe the 0:12:43.320 --> 0:12:46.719 first the lawsuit was filed in September was one of 0:12:46.760 --> 0:12:50.640 the first UM one of the first big cases we 0:12:50.720 --> 0:12:53.360 saw from the SEC after the pandemic has obviously that 0:12:53.480 --> 0:12:56.079 put a big crimp in UM. The number of federal 0:12:56.160 --> 0:12:58.520 actions that were brought. The courthouse kind of shut down 0:12:58.559 --> 0:13:01.439 for an entire year. UM. So I think one of 0:13:01.480 --> 0:13:03.280 the reasons this is taken so long to get to 0:13:03.360 --> 0:13:06.520 this point is because there's robust discovery. They've exchanged a 0:13:06.559 --> 0:13:09.640 lot of documents. There's been fights over documents, UM. But 0:13:09.760 --> 0:13:12.960 the pandemics certainly hurt UM the pace of this case. 0:13:15.200 --> 0:13:18.079 Why does Ripple maintain that they are not a security like, 0:13:18.200 --> 0:13:20.679 what is the specific argument they have been trying to make. 0:13:21.000 --> 0:13:24.520 So they've been saying that x RARP was created but 0:13:25.120 --> 0:13:27.720 basically given away, it was given away to the community 0:13:27.760 --> 0:13:31.360 and therefore has no intrinsic security value. They say, what 0:13:31.520 --> 0:13:35.520 they've received, Yes, there's been x RP sales, We've sold tokens, 0:13:35.600 --> 0:13:37.839 we've given tokens to Ripple that have been distributed to 0:13:37.880 --> 0:13:40.880 the public. But they say we don't have nothing. Is 0:13:41.120 --> 0:13:46.079 there's no central person that is making money off x RP. 0:13:46.880 --> 0:13:50.400 One of the other big things about you know this 0:13:50.720 --> 0:13:53.959 particular cases. There have been so few other examples like this, 0:13:54.240 --> 0:13:58.120 and so there is a lot of speculation that whatever happens, 0:13:58.160 --> 0:14:00.439 if Ripple prevails, if the sec prevails, this could be 0:14:00.480 --> 0:14:05.120 potentially precedent setting for a lot of crypto What would 0:14:05.160 --> 0:14:07.800 those precedents look like? Would it established that yes, certain 0:14:07.840 --> 0:14:10.000 types of things are or aren't a security? Just like 0:14:10.120 --> 0:14:12.520 in non lawyer terms, what are people waiting to see? 0:14:13.400 --> 0:14:18.439 There are a number of factors that go into whether 0:14:18.559 --> 0:14:21.800 or not something is a security, but in this case, 0:14:21.960 --> 0:14:24.560 and in most crypto cases, it really depends on the 0:14:24.640 --> 0:14:28.560 individual currency itself or the crypto or whatever. The parameters 0:14:28.760 --> 0:14:32.040 of of the individual token or the issuing or what 0:14:32.200 --> 0:14:35.800 have you, you know, beyond traditional securities and what we've 0:14:35.840 --> 0:14:39.040 had concepts of that. This could kind of expand that 0:14:39.160 --> 0:14:42.840 definition a little bit and make it more so that 0:14:43.360 --> 0:14:47.520 individual tokens could be considered securities in a broader sense. Um, 0:14:47.680 --> 0:14:52.280 just given what the framework surrounding them. Um. It may not, like, 0:14:52.840 --> 0:14:55.320 you know, bring the hammer down on the entire industry, 0:14:55.760 --> 0:14:58.480 but it could severely limit what they kind of do 0:14:58.840 --> 0:15:02.000 and increase their gulatory exposure. And it may not be 0:15:02.280 --> 0:15:04.560 entirely parallel, but I kind of look at this like 0:15:04.640 --> 0:15:07.640 if you look at the early days of the airlines, Um, 0:15:08.120 --> 0:15:09.920 there was it was kind of the wild West. People 0:15:09.960 --> 0:15:14.160 were flying. You can get on a plane and might crampy, right, 0:15:14.880 --> 0:15:18.440 And in order to have the public have you know, 0:15:19.160 --> 0:15:21.640 confidence in getting on an airplane and have it be 0:15:21.720 --> 0:15:25.480 a robust industry, regulators you know, had a vested interest 0:15:25.520 --> 0:15:28.239 in kind of making it safer and making it obviously 0:15:28.400 --> 0:15:31.080 safer to the public. And I think that's what the 0:15:31.200 --> 0:15:35.000 SEC wants to do here. Cryptocurrency is obviously not going away. 0:15:35.440 --> 0:15:37.640 It is a new market and regulators are trying to 0:15:37.680 --> 0:15:40.240 figure it out. But the Howie test was really not 0:15:40.560 --> 0:15:45.240 used excited that much. It always came to whether something 0:15:45.360 --> 0:15:48.560 fell under the regulation of the SEC. Now, I think 0:15:48.600 --> 0:15:51.520 the SEC sees a little bit of and the Justice 0:15:51.560 --> 0:15:54.640 Department sees a little bit of expanding need a need 0:15:54.720 --> 0:15:58.200 to expand on that definition and at least get the 0:15:58.280 --> 0:16:01.040 courts to see if it agrees with what they're saying. 0:16:01.560 --> 0:16:03.240 And in that aspect, I think this is a big 0:16:03.360 --> 0:16:06.040 test case for them and the crypto industry in general. 0:16:06.840 --> 0:16:09.080 As a part of this being a big test, as 0:16:09.120 --> 0:16:11.360 you say, for the rest of the crypto industry, you know, 0:16:11.400 --> 0:16:13.320 we'll get a lot of emails being like coin base 0:16:13.400 --> 0:16:16.520 as filed and amicus brief and support of Ripple. What's 0:16:16.520 --> 0:16:18.920 an amicus brief? So amicas brief is a friend of 0:16:19.000 --> 0:16:22.560 the court um they file basically in support of whatever 0:16:22.680 --> 0:16:25.240 your position is. There's been a number of them with Ripple, 0:16:25.320 --> 0:16:28.200 and in fact, the whole industry seems to be behind 0:16:28.320 --> 0:16:30.560 Ripple on this. We had coin based recently, we had 0:16:31.120 --> 0:16:34.520 the Blockchain Association file last week and support. I wouldn't 0:16:34.520 --> 0:16:37.000 say it's unusual, but you have a lot of people 0:16:37.120 --> 0:16:40.160 lining up behind Ripple, and that is unusual for a 0:16:40.560 --> 0:16:44.440 n SECC. You don't usually see this amount of public 0:16:44.520 --> 0:16:48.720 engagement and industry engagement. Certainly we have that with limited cases. 0:16:48.760 --> 0:16:51.760 We had the case We're City Bank actually accidentally sent 0:16:51.800 --> 0:16:57.520 a million dollar a billion dollars to some Revlankas absolutely bonkers. 0:16:57.560 --> 0:17:01.160 But in terms of like how those cases are tried, 0:17:01.240 --> 0:17:04.159 that's the parallel that I draw here, and that you 0:17:04.280 --> 0:17:06.280 had a lot of the industry saying, hey, this could 0:17:06.359 --> 0:17:09.800 ruin the syndicated loan industry if you force people to 0:17:10.359 --> 0:17:12.800 do this. But in in this aspect, they have not 0:17:13.000 --> 0:17:16.960 brought criminal charges against Ripple Um, and many people have 0:17:17.040 --> 0:17:19.800 asked why, and that's a good indication that this may 0:17:19.880 --> 0:17:22.520 be something that they want to test the waters to 0:17:22.640 --> 0:17:25.320 see how far they can get on the civil side 0:17:25.400 --> 0:17:27.720 or what you know, the law. The judges will agree 0:17:27.760 --> 0:17:29.600 with them and maybe eventually get up to an appeals 0:17:29.640 --> 0:17:32.159 court that could further define what's the security and to 0:17:32.240 --> 0:17:35.040 find if really how he tested something shouldn't be applied here. 0:17:35.040 --> 0:17:38.160 If there's something new that probably will be the end 0:17:38.280 --> 0:17:40.399 result of this is there's gonna be need to be 0:17:41.160 --> 0:17:46.280 um you know, laws that will define clearly what the 0:17:46.400 --> 0:17:48.520 industry can do and what it can't do. Maybe in 0:17:48.560 --> 0:17:50.600 a future time, we'll be talking about the ripples has 0:17:50.720 --> 0:17:52.959 to not just the how he tought. Sure, exactly, very 0:17:53.000 --> 0:17:56.040 good point. Thank you, Chris. You can find more of 0:17:56.080 --> 0:17:58.600 Crystal Max for pausing on the Bloomberg terminal, on Bloomberg 0:17:58.640 --> 0:18:02.359 dot com and on Twitter. He's at Chris Dolmac that 0:18:02.560 --> 0:18:05.040 c H R I S D O L M E 0:18:05.200 --> 0:18:17.760 T S H on the next episode of Bloomberg Crypto. 0:18:18.359 --> 0:18:21.200 The people who most actively believe in Web three, the 0:18:21.280 --> 0:18:24.840 venture capitalists, have frequently argued that it's a system designed 0:18:24.840 --> 0:18:29.720 to benefit and reward creators, artists, musicians, writers, creatives of 0:18:29.800 --> 0:18:34.560 all stripes. The reality is as always more complicated, especially 0:18:34.600 --> 0:18:41.159 when it comes to royalty payments. This is Bloomberg Crypto, 0:18:41.440 --> 0:18:44.680 a daily podcast from Bloomberg and I Heart Radio. For 0:18:44.800 --> 0:18:47.040 more shows from I Heart Radio, visit the I Heart 0:18:47.119 --> 0:18:50.760 Radio app, Apple Podcasts, or wherever you get your podcasts. 0:18:51.600 --> 0:18:54.160 Send us your comments, questions, or suggestions for the show 0:18:54.359 --> 0:18:57.600 to Crypto at Bloomberg dot net or find us on Twitter. 0:18:57.880 --> 0:19:02.600 We're at Crypto. The supervising producer of Bloomberg Crypto is 0:19:02.680 --> 0:19:07.080 Vicky Verglina. Our senior producer is Janet Babin. Our producers 0:19:07.080 --> 0:19:10.639 are Mohammed Faruk and Sharon Barriro. Our associate producers are 0:19:10.680 --> 0:19:14.280 Ty Butler and Moses on Them. Desta wonder At is 0:19:14.320 --> 0:19:19.640 our engineer. Original music by Leo Sidron. I'm Stacy Marie 0:19:19.720 --> 0:19:21.159 Schmal We'll be back tomorrow.