XRP Legal Battle: Judge Rules in Favor of XRP Token, Against Ripple’s Activities
Key Takeaways:
- A federal judge ruled that the XRP token itself does not meet the standards set for a security in XRP promoter Ripple Lab’s legal battle against the SEC.
- Ripple’s institutional sales of XRP were considered unregistered securities offerings in violation of securities law.
- The SEC’s case against Ripple will now continue, with a jury to determine whether Ripple executives aided and abetted the illegal offering of XRP to institutional investors.
XRP Token Is Not a Security
At the heart of the lawsuit filed by the SEC against Ripple Labs was the question of whether the XRP token is a security and whether its sale was an unregistered offering in violation of securities laws. The SEC alleged the fintech sold $1.3 billion in unregistered securities to investors.
U.S. District Court Judge Analisa Torres ruled XRP itself is not an investment that “embodies the Howey requirements of an investment contract.” The Howey Test is the standard test to check whether a financial product is a security.
Some other distributions of XRP were deemed not to be securities offerings, such as algorithmic sales on exchanges and compensation for employees.
Institutional Sales of XRP Were Securities Offering
While some may cheer the decision regarding the XRP token, Judge Torres’ ruling was a mixed bag for both parties. Ripple’s $728.9 million in XRP sales to institutional investors constituted an unregistered securities offering, despite XRP itself not being considered a security.
Ripple’s claim of XRP solely acting as a currency or utility token was refuted, as investors were bound by agreements not to sell their XRP for a specific period, indicating an investment intent.
The court order suggests institutional investors purchased XRP as an investment based on Ripple Labs’ efforts, violating the Howey Test criteria.
Implications and Future Outlook
This decision in the XRP legal battle holds significance in the cryptocurrency community, amidst regulatory actions by the SEC against platforms like Binance, Coinbase, and Kraken for the sale of unregistered securities.
While the order may bring clarity to some aspects, experts anticipate further complications and continued litigation. Some believe that the SEC may appeal the ruling, while others question whether this is the final resolution in the court system.
The case will proceed to trial to address additional claims made by the SEC, including allegations of Ripple executives aiding in the unregistered offering of XRP to institutional investors.
