Ripple’s CEO fact-checks Ethereum’s decentralization test at the SEC, calls it fiction

Ripple CEO Brad Garlinghouse responded to a claim from Fox Business panelist and journalist  Charles Gasparino that the US Securities and Exchange Commission believes XRP passes the “Ethereum decentralized test.”

Garlinghouse said: “There is no Ethereum decentralization test at the SEC. This is fiction.”

Gasparino had quoted Garlinghouse’s video announcing the end of the SEC vs XRP legal battle on Wednesday. The SEC filed a lawsuit against Ripple Labs in December 2020, alleging the company violated US securities laws by selling $1.3 billion worth of XRP. 

Obviously the question remains about the other part of the case but it’s clear current @SECGov believes $XRP passes the Etherium decentralized test as it’s trading today. Also for the @SECGov: How does I square the duo disclosure standard set by judge Torres https://t.co/1Jb2a1bN5I

— Charles Gasparino (@CGasparino) March 19, 2025

Without registering the asset as a security, the agency argued that Ripple executives ignored prior warnings and failed to provide necessary disclosures to investors.

Ethereum or Howey test?

It is unclear if Gasparino meant to say the Howey or the Ethereum test, both of which members of the SEC have cited before. The financial watchdog backed its case against XRP with the “Howey Test,” a legal standard derived from a 1946 Supreme Court ruling in SEC v. Howey.

The test defines security as an investment involving the expectation of profits primarily from the efforts of others. The SEC contends that XRP met this condition at the time of its public offering to both investors and institutions, but Ethereum was previously determined not to be a security.

In a 2018 speech, William Hinman, former Director of the SEC’s Division of Corporation Finance, suggested that Ether did not meet the criteria of a security under the Howey Test, which he also called “the Ethereum test.” 

The idea behind the decentralization framework is that if a crypto project operates without a central entity or controlling group, there is no clear “issuer.” In such cases, no single party would have access to insider information or an unfair informational advantage over others.

However, emails released in 2023 tied to this speech indicate internal SEC discussions on the matter, revealing that officials were not all sure of Ether’s classification.

One email, dated June 12, 2018, from then-SEC Director of Trading and Markets Brett Redfearn, discussed some concerns over the agency’s position on Ethereum. 

“As written, the language remains vague as to whether ETH is a security. If you want to make an affirmative statement that it is not a security, the language could be stronger,” Redfearn wrote.

Adding to these internal discussions, an SEC official later stated in an email that the agency saw “no need to regulate Ether” as it was offered in 2018. Ripple published these documents as part of its legal defense.

XRP price trends upwards after SEC news

Meanwhile, analysts are closely watching XRP’s market movements against the backdrop of news the XRP community has coined as bullish. The crypto is up 13.2% in the last 24 hours, now changing hands slightly above $2.5, per Coingecko data. 

A crypto analyst known as “Steph” on X suggested that XRP may have completed its recent downward cycle and could strongly rebound upwards in the coming days. 

The #XRP bottom is in.

Send it higher! pic.twitter.com/3zG52bh7Hj

— STEPH IS CRYPTO (@Steph_iscrypto) March 16, 2025

Another market observer noted that XRP had formed a higher high sequence, signaling the potential for a more profound bullish market trend. They gave some price projections of XRP reaching $2.79 to $2.92 before experiencing another pullback.

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