In a significant victory for the crypto industry, Ripple’s XRP token has been declared not to be a security by the United States District Court for the Southern District of New York. The court ruling, delivered on July 13, 2023, marked the first-ever industry win against the U.S. Securities and Exchange Commission (SEC) and sets a precedent for future regulations on crypto assets and tokens in the country.
The SEC Lawsuit and Judge Torres’ Ruling
To provide context, the SEC initiated a lawsuit against Ripple Labs and its executives, Brad Garlinghouse and Christian A. Larsen, in December 2020. The SEC alleged that the company had unlawfully offered and sold securities through their XRP token, violating the Securities Act of 1933, Section 5. However, after extensive hearings and deliberations, Judge Analisa Torres stated that XRP, as a digital token, does not meet the Howey requirements of an investment contract and, therefore, cannot be classified as a security.
A Milestone for Ripple and the Crypto Market
Following the court’s verdict, Ripple’s CEO, Brad Garlinghouse, expressed his elation, stating that the decision is not only a historic moment for the company but also for the entire crypto market. He emphasized that Ripple has always been confident in being on the right side of the law and history. The ruling is seen as a significant setback to the SEC’s regulation-by-enforcement approach, and Garlinghouse hopes it will prompt Congress to establish clear regulatory guidelines for cryptocurrencies in the U.S.
Clarifying the Status of XRP
Ripple’s blog post underscored that the core issue of the case was whether XRP itself could be considered an investment contract, thus making it a security under the law. With the court’s ruling affirming that XRP is not a security, Ripple’s argument against the SEC’s theory gains legal support. Moreover, the court clarified that Ripple’s XRP sales on exchanges, as well as sales by its executives and distributions to developers, charities, and employees, are not securities as a matter of law.
Implications for the Crypto Industry
Ripple’s Chief Legal Officer, Stu Alderoty, explained that the court’s distinction between the XRP token and the manner in which it was sold is a groundbreaking ruling. This decision will have far-reaching consequences on how digital tokens are classified in the U.S., potentially influencing other crypto assets facing SEC scrutiny. Alderoty believes that the SEC can no longer boast about its previous crypto enforcement record, which primarily consisted of settlements with smaller players who lacked the resources or determination to fight back.
The Path Forward for Ripple and Crypto Regulation
While the recent court ruling is undoubtedly a significant achievement for Ripple, the company’s quest for sensible crypto regulation in the U.S. is far from over. Ripple’s blog post affirmed that this victory is merely the beginning of their efforts. In the meantime, the company will continue to invest in jurisdictions with clear and embracing regulatory frameworks, such as the In-Principle Approval (IPA) for a Major Payments Institution License granted by the Monetary Authority of Singapore.
Exchanges Embrace the Verdict
The court’s ruling has already had an impact on exchanges that had previously delisted XRP due to regulatory uncertainty. Major platforms, including Coinbase, Kraken, Gemini, Bitstamp, and others, have either relisted XRP or announced their plans to do so. The verdict brings newfound clarity and confidence to the market.
As the court’s ruling unequivocally establishes the status of XRP as a non-security, it has sent shockwaves through the crypto market, prompting major exchanges like Coinbase, Kraken, Gemini, Bitstamp, and others to either relist XRP or announce their intentions to do so. This newfound clarity and confidence in XRP’s regulatory standing have investors eagerly eyeing potential opportunities in the cryptocurrency market. If you’re looking to seize these exciting developments and explore investing in XRP or other cryptocurrencies, platforms like Crypto Comeback Pro and Crypto Trader offer a user-friendly and accessible gateway to the world of crypto trading.
