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The heart of the case revolves around whether XRP is a security. The SEC claims that XRP meets the criteria of an investment contract, meaning it should have been registered. Ripple argues XRP is a currency, similar to Bitcoin or Ethereum, and therefore shouldn't be regulated as a security. A crucial point in the legal argument is the **Howey Test**. This test, established by the Supreme Court, determines if a transaction qualifies as an investment contract. The SEC is using the Howey Test to demonstrate that XRP sales meet all the requirements, while Ripple is trying to prove they do not.
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