A U.S. judge ruled Thursday that Ripple Labs did not violate federal securities laws when it sold some of its XRP tokens on public cryptocurrency exchanges. The ruling, though only partial, is being celebrated as a landmark victory for the cryptocurrency industry.
Following the news, the price of XRP, the native token of the Ripple ecosystem, surged by more than 83% to $0.86 per coin. according to to CoinGecko. At the time of writing, XRP has cut some of these gains, falling to $0.78. The token remains 77% off the all-time high of $3.40 set on January 7, 2018.
The ruling has given life to other risky crypto tokens classified as “securities.” Matic is up 18%, Litecoin and Solana are up nearly 19% each, and Cardano’s ADA is up over 20%. Bitcoin and Ethereum also rose, rising more than 4% and 6%, respectively.
“XRP is not a security”
Ripple is a privately held fintech company that provides global payment solutions through a patented payment network called Ripple Network. The company connects banks, payment providers and cryptocurrency exchanges, enabling real-time payments and reduced transaction fees.
In December 2020, the U.S. Securities and Exchange Commission (SEC) sold $1.3 billion worth of assets to Ripple, the issuer of the eponymous XRP token, without registering it as a security with the agency. filed a lawsuit as
Ripple co-founder Chris Larsen and CEO Brad Garlinghouse, who founded Ripple in 2012, were also named as co-defendants in the matter. The company denied that XRP is a security. Securities are subject to strict regulation by US authorities.
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in her RulingNew York Southern District Court Judge Analisa Torres ruled that XRP “is not necessarily a security on the face of it,” potentially ending a three-year lawsuit.
The ruling applies to the sale of XRP on cryptocurrency exchanges, as the buyer did not expect to profit from Ripple’s efforts.Torres said XRP retail sales are ‘blind bid/ask trades’ [in which buyers] It was not known if their payment was sent to Ripple or another seller of XRP. ”
The ruling divided XRP sales into three categories: institutional sales, programmatic sales, and other sales. Institutional sales turned out to be securities offerings, but programmatic sales and other distributions were not.
But it wasn’t all good news. The SEC has partially succeeded in some of its claims against Ripple. Judge Torres ruled that Ripple’s sale of $729 million worth of XRP to hedge funds and other sophisticated buyers amounted to an unregistered sale of securities.
Crypto industry reaction
Here are the most important parts of this ruling:
“XRP as a digital token is not a ‘contract, transaction’ per se.[,] An “or scheme” that embodies the Howey requirements of an investment contract.
This is now a legal issue (not one that can be brought to court).
— Brad Garlinghouse (@bgarlinghouse) July 13, 2023
Ripple Chief Legal Officer Stuart Alderoti tweeted “By law, XRP is not a security. And by law, a sale on an exchange is not a security. is not a security.”
Coinbase previously delisted XRP on its trading platform, but has announced that it will now allow the asset to be traded again.
“We have read Judge Torres’ thoughtful ruling. We have carefully considered our analysis. Said on Twitter.
Gemini Said That is, “We are considering listing XRP for both spot trading and derivatives trading.”
US Congressman Tom Emer praises ruling saying“The Ripple case is a landmark development in that it establishes that tokens are separate and distinct from investment contracts, whether they are part of them or not. Let’s make it law.”
But other observers are cautious. Brown Rudnick partner Stephen Palley said: Said “The idea that XRP is not a security is plain wrong,” CNBC said. Still, “if I were an XRP holder, I would be happy now,” he added.
Torres’ ruling comes as the crypto industry faces significant macroeconomic headwinds, as highlighted by the SEC’s lawsuits against Coinbase and Binance in June, and U.S. regulators are pushing the sector to take action. It was served while tightening.
Ripple’s victory shed a different light on the industry and became a big reason for celebration in the crypto world.