U.S. Judge Rules XRP Sales Did Not Violate Securities Law

B-cube.ai
4 min readJul 15, 2023

In a groundbreaking decision on Thursday, U.S. District Judge Analisa Torres delivered a landmark legal victory to Ripple Labs Inc, stating that the company did not violate federal securities law through the sale of its XRP token on public exchanges. This ruling has significant implications for the entire cryptocurrency industry and has sent the value of XRP soaring.

The judge’s ruling comes as a major relief for Ripple, as it marks the first win for a cryptocurrency company facing legal action brought forth by the U.S. Securities and Exchange Commission (SEC). However, it is important to note that the SEC did secure a partial victory in the case.

Following the news, XRP witnessed an impressive surge, climbing a staggering 75% by late afternoon on Thursday, according to Refinitiv Eikon data. This substantial increase in value demonstrates the market’s response to the court’s decision, which has injected renewed optimism into the XRP community.

The legal battle between Ripple and the SEC has been closely watched by both cryptocurrency enthusiasts and regulatory bodies worldwide. The SEC had alleged that Ripple’s sale of XRP amounted to an unregistered securities offering, a claim vehemently denied by Ripple.

Judge Torres’ ruling in favour of Ripple hinged on her determination that the SEC failed to provide sufficient evidence to prove that XRP transactions should be classified as securities. This decision aligns with Ripple’s long-standing position that XRP is a digital asset and should not be subjected to the same regulatory scrutiny as traditional securities.

The significance of this legal victory extends beyond Ripple, as it could set a precedent for future cases involving cryptocurrencies and their classification under securities laws. In other words, this ruling may influence how other cryptocurrencies are viewed by regulatory bodies and could potentially shape the regulatory landscape for the entire industry.

While Ripple may have emerged triumphant in this legal battle, it is important to note that the judge also granted the SEC a partial victory. The court acknowledged that certain direct XRP sales to sophisticated investors conducted by Ripple did qualify as securities offerings and would fall under the jurisdiction of the SEC.

Nevertheless, the favourable ruling for Ripple has undoubtedly provided a boost to the cryptocurrency industry, reinforcing the argument that not all digital assets should be treated as securities. It is anticipated that this decision will stimulate further discussions and deliberations regarding the classification and regulation of cryptocurrencies globally.

This event can be considered a groundbreaking moment for cryptocurrencies. Ripple’s recent legal triumph marks a major milestone not only for the company but also for the wider cryptocurrency industry. It reinforces the idea that cryptocurrencies can function within existing regulatory frameworks without violating securities laws.

Judge Torres’ decision carries significant implications that will resonate throughout the cryptocurrency ecosystem, leaving a lasting imprint on the future of digital assets and their regulatory landscape. As the industry continues to grow and mature, it remains to be seen how this ruling will influence the strategies of regulators and participants in the market.

Opinion

Although court judgments play an important role in the continental system, they do not have binding force, but their persuasive power is not negligible. The Anglo-Saxon legal system, like that of the United States, is based on precedents. The legal system is shaped by judicial practice. Therefore, in this context, the judgment is of particular importance. Recently, the systematization of crypto-assets has generated great controversy. Are they classified as securities or not? As we now know, XRP is not a security. I agree with the verdict. This was my opinion already at the beginning of the legal proceedings.

For the quality of the securities, it would be necessary for the investors who acquired ownership rights to receive income on some ownership basis. For example, if Ripple’s profits were distributed to holders as a quasi-dividend payment. If XRP worked this way, it would clearly make it a security token. The mere fact that many people buy these assets for speculative purposes does not make them securities. If this were the basis of the demarcation, even a vintage car or an old coin could qualify as a security. The price of the devices fluctuates according to the rules of supply and demand, and there are those who want to profit from it. This is not created by the quality of the securities but is a natural part of business thinking.

Definitely a huge milestone for the crypto industry and good news for holders. If it had been classified as a security, it would mean that the court would exercise a hard-line interpretation and push cryptocurrencies under the jurisdiction of the Stock Exchange Commission, making the issue exclusive and changing the actors and the future of the industry.

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