Ripple Wins Favorable Ruling in SEC Case: XRP Not Deemed a Security

Last Updated: 14 July 2023

In a significant development, the legal battle between Ripple, a prominent blockchain company, and the United States Securities and Exchange Commission (SEC) has concluded with a favorable ruling for Ripple. The judge overseeing the case, Analisa Torres, determined that XRP, the cryptocurrency associated with Ripple, does not fall under the classification of a security. This ruling has far-reaching implications for the SEC’s regulatory efforts in the cryptocurrency industry. The reactions to the verdict have been varied, with Ripple’s victory being lauded by many, while concerns and disagreements have also emerged regarding certain aspects of the judgment.

The Court’s Ruling and Concerns

Judge Analisa Torres, in her ruling on July 13, asserted that XRP should not be considered a security. She clarified that the sales of XRP on cryptocurrency exchanges and by Ripple’s executives do not constitute securities sales. Additionally, distributions of XRP to charities, developers, or employees were also deemed non-securities. However, the court did recognize that past direct sales of XRP to institutional clients qualify as an investment contract. Ripple’s Chief Legal Officer (CLO), Stuart Alderoty, stated that further proceedings would take place regarding these institutional sales in compliance with the court’s order.

Bill Morgan, a lawyer supporting Ripple, expressed concerns about the judgment, particularly regarding the grouping of sales to on-demand liquidity (ODL) customers with institutional sales. Morgan argued that sales to ODL customers were fundamentally different and questioned how this ruling would impact Ripple’s ODL product and overall business. He emphasized that ODL customers do not hold XRP for long periods, often transacting within seconds and not expecting investment profits.

SEC’s Response Draws Criticism

The SEC, in response to the ruling, issued a statement to Fox Business that Ripple’s CLO, Stuart Alderoty, labeled as “pathetic.” The SEC’s statement mentioned its satisfaction with the ruling regarding institutional customers but failed to acknowledge the part of the ruling that favored Ripple. Journalist Eleanor Terret shared the statement, which stated, “We are pleased that the court found that XRP tokens were offered and sold by Ripple as investment contracts in violation of the securities laws in certain circumstances.”

The SEC spokesperson further noted that the court affirmed the SEC’s position that the Howey test, a well-established legal framework for analyzing securities, governs the securities analysis of crypto transactions. The spokesperson dismissed Ripple’s alternative test and emphasized that various tangible and intangible assets can qualify as investment contracts under the Howey test. The court also rejected Ripple’s argument of lack of fair notice, highlighting that ignorance of the securities laws is not a valid defense. The SEC stated that it would continue to review the decision.

Exchanges Relist XRP

In response to the ruling, Coinbase’s Chief Legal Officer, Paul Grewal, announced that Coinbase had thoroughly reviewed the court’s decision and decided to relist XRP and resume trading on the XRP network. The relisting of XRP by Coinbase carries significant implications, with Tyler Winklevoss, co-founder of cryptocurrency platform Gemini, suggesting that the ruling against Ripple weakens the SEC’s case against Coinbase. Winklevoss directed a message to the SEC Chief, Gary Gensler, expressing his amusement with the situation.

Additionally, Binance.US, the US branch of the popular cryptocurrency exchange Binance, has also opted to reintroduce XRP to its platform following the recent court ruling. Binance.US will allow deposits and commence trading for the XRP/USDT pair on July 14, at 9 a.m. Eastern Time (ET).

XRP Price and Activity Surge

The news of Ripple’s legal victory had an immediate impact on the price and activity of XRP. Within just three hours, XRP experienced a remarkable surge of over 87%. This surge was fueled by significant whale transactions and other market activities. Furthermore, social discussions surrounding XRP spiked, accounting for 7.4% of all cryptocurrency-related conversations online, according to data from the crypto analytics platform Santiment.

As of the time of writing, XRP was trading at $0.783, reflecting a substantial increase of 65.68% within a day. Over the past week, XRP recorded gains of 68.64%, and on a monthly chart, it grew by 54.21%, indicating strong market performance.

The unprecedented surge in XRP’s price and activity following Ripple’s legal victory highlights the immense potential for investors in the cryptocurrency market. Such extraordinary market movements, driven by whale transactions and amplified by widespread social discussions, demonstrate the dynamic nature of digital assets. For those seeking to capitalize on the opportunities presented by cryptocurrencies like XRP, platforms such as Bitcoin Union or Bitcoin Circuit can provide a secure and accessible means to engage in this exciting investment landscape.

Author
  • Luke Handt

    Luke Handt is a seasoned cryptocurrency investor and advisor with over 7 years of experience in the blockchain and digital asset space. His passion for crypto began while studying computer science and economics at Stanford University in the early 2010s.

    Since 2016, Luke has been an active cryptocurrency trader, strategically investing in major coins as well as up-and-coming altcoins. He is knowledgeable about advanced crypto trading strategies, market analysis, and the nuances of blockchain protocols.

    In addition to managing his own crypto portfolio, Luke shares his expertise with others as a crypto writer and analyst for leading finance publications. He enjoys educating retail traders about digital assets and is a sought-after voice at fintech conferences worldwide.

    When he's not glued to price charts or researching promising new projects, Luke enjoys surfing, travel, and fine wine. He currently resides in Newport Beach, California where he continues to follow crypto markets closely and connect with other industry leaders.

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