Ripple passes key expectations of the HOWEY TEST, which I’ve laid out below. Also, Ripple has never promised that XRP would rise in value, nor have they ever sold XRP as an investment or to raise money. Ripple makes there money by selling their software just like any software company does like Cisco, Oracle, or Microsoft. As a company, Ripples focus is long term, which is strategic as they are building out there infrastructure with partnership after partnership. Currently the banks are adopting xCurrent, which settles transactions in real time for under a penny. As Ripple builds out there infrastructure why will banks adopt xRapid? Because there are liquidity issues that banks and financial institutions all around the world have no real solution for. They way that they currently transfer, and exchange dollars into euros, or rupees into dollars, or pesos into euros, etc. is grossly insufficient. xRapid (XRP) not only solves the liquidity issue but the savings are astronomical vs the current methods, which were adopted from a system thats 50 years old.
Why XRP is not a Security:
THE HOWEY TEST - The Howey Test is a test created by the Supreme Court for determining whether what qualifies as "investment contracts." If so, then under the Securities Act of 1933 and the Securities Exchange Act of 1934, those transactions are considered securities and therefore subject to certain disclosure and registration requirements, (https://consumer.findlaw.com/securities-law/what-is-the-howey-test.html
Security Requirements Under the HOWEY TEST:
1) It is an investment of money
2) There is an expectation of profits from the investment.
3) The investment of money is in a common enterprise.
4) Any profit comes from the efforts of a promoter or third party.
Breakdown analysis of why Ripple is not a security under the HOWEY TEST:
1) Ripple specifically states that XRP is not meant to be used as an investment vehicle. Every announcement that Ripple has made regarding xRapid (XRP) has been for its intended purpose(s), which is to solve the liquidity issues faced by banks and financial institutions all around the world, and not as a form of investment in Ripple.
2) Ripple has never promised that XRP will rise in value if you hold it short term, or long term. Anyone who is holding XRP believes that once xRapid (XRP) is adopted by the financial institutions who are currently test piloting it that XRP will rise in value, but by no means does that guarantee that it will. This is the whole purpose behind risk management and never investing more than what one is willing to lose. The purpose of xRapid, (XRP) is to solve the liquidity issues faced by banks all around the world. XRP can transact any form of fiat in real time for under a penny verses paying $40 for a wire, (Domestic/International fees vary), and taking up to 1-2 days to get there. There is no comparison as the current system is grossly insufficient. In retrospect, if the banks who have partnered with Ripple are already using xCurrent it’s simply a matter of time of when they begin using xRapid, (XRP) because of liquidity, savings, and speed.
If XRP is a security then does that mean when Western Union and MoneyGram go live with XRP that they will be using a security to settle fiat transactions? LOL, of course not because XRP is not a security, but a digital asset (crypto currency).
3) There is no COMMON ENTERPRISE. "Most federal courts define a common enterprise as one that is horizontal, meaning that investors pool their money or assets together to invest in a project." Ripple doesn’t get funded when someone buys XRP off of an exchange. This is what ICO does, and Ripple has never had an ICO for XRP. Although Ripple owns a large amount of XRP, it is not directly related to the business of Ripple. If Ripple decided to pull the plug on its operations XRP would still exist as the XRP ledger existed before Ripple did. Ripple doesn’t benefit financially when traders or investors buy XRP off the exchanges as to serve a Common Enterprise. Meaning all the buying and selling of XRP on the different exchanges doesn’t effect Ripples bottom line like it is meant to serve a Common Enterprise.
4) The final factor of the Howey Test concerns whether any profit that comes from the investment is largely or wholly outside of the investor's control. If so, then the investment might be a security. If, however, the investor's own actions largely dictate whether an investment will be profitable, then that investment is probably not a security." The price of XRP is solely determined by the traders and investors willing to buy, hold, or sell XRP. Ripple does not control the price of XRP as this very question was asked directly to Miguel Vias while the Ripple team was in Seoul Korea. Mr. Vias is the head of XRP markets, and is in charge of building liquidity for new financial products and works with market makers, traders, investors and exchanges to strengthen the XRP markets and to set the stage for large scale institutional adoption. Miguel was CRYSTAL clear that Ripple does not, has not, and will not manipulate the price of XRP....period! The Ripple Seoul Korea video is broken into two parts, and would encourage all XRP holders to watch both videos. Link to video 2 is below where Miguel is asked and answers the question around the 24:20 marker.
Ripple Seoul Korea Meet up! 2 https://youtu.be/mqGINJr80bg