The legal clash between Ripple and the US Securities and Exchange Commission has turned into a cornerstone case for the entire cryptocurrency industry. According to many, it may have serious implications for future lawsuits, regardless of how it ends.
Most recently, Judge Analisa Torres ruled that secondary sales of XRP didn’t constitute investment contracts – a move that the market perceived as a major win for Ripple. But is there more to the story? Did Brad Garlinghouse and Co. win?
To answer that, we first need to understand what exactly happened so far.
Massive Victory but Partial Nonetheless
The crux of the SEC’s charges is that Ripple – the company behind XRP – conducted an unregistered sale of securities in violation of existing regulations.
However, the Commission also alleged that secondary sales of XRP (read: sold on centralized exchanges like Coinbase) also constituted investment contracts. To this, it’s important to take a closer look at the recent ruling itself.
Immediately as the news broke out, XRP exploded by more than 70% in hours before settling down and trading at its current prices. Therefore, it’s safe to assume that the market perceived the ruling as favorable for Ripple – and it was, to a certain extent.
More precisely, Judge Torres ruled that secondary sales of XRP didn’t constitute investment contracts. See, because of the SEC allegations, a myriad of exchanges had previously delisted XRP in fear of repercussions. These included:
Now that the ruling is out, some of the above, such as Coinbase, Crypto.com, Kraken, and Bitstamp, re-listed XRP.
So, why a partial victory?
Well, as we mentioned above, the allegations are two-fold, and Judge Torres confirmed the position of the SEC in regard to institutional sales.
More specifically, the Judge said:
…Therefore, having considered the economic reality and totality of circumstances surrounding the Institutional Sales, the Court concludes that Ripple’s Institutional Sales of XRP constituted the unregistered offered and sale of investment contracts in violation of Section 5 of the Securities Act.
So, What’s Next?
Based on the above, it seems relatively straightforward to assume that the legal battle is far from being over.
Commenting on the ruling was the Chairman of the United States Securities and Exchange Commission, Gary Gensler, who didn’t hide his disappointment:
While disappointed on what they said about retail investors, we’re still looking at it and assessing that opinion.
His speech itself was stuttered, and it appeared at times that Gensler was at a loss for word on stage at the National Press Club on July 17th.
That said, it’s also clear that the SEC is likely not going to let this go. However, the fact that XRP got re-listed on multiple exchanges because of the most recent ruling is a huge victory for Ripple. More importantly, the ball is in the SEC’s court now and it’s interesting to see if they will file an appeal.
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