Ripple Labs scored a victory in the United States district court in the southern New York district today as judge Analisa Torres ruled in favor of the company in a case brought forth by the SEC dating back to 2020.
According to documents filed on July 13, Judge Torres has granted summary judgment in favor of Ripple Labs with regard to whether Ripple (XRP) token is or is not a security.
The judge ruled that the XRP token "is not necessarily a security on its face" - except when it was sold to raise funds from institutions.
The SEC lawsuit sought to compel Ripple to stop offering its XRP token under the premise that XRP was a security and, thus, required additional regulation.
Per court documents viewed by Cointelegraph:
"Defendants’ motion for summary judgment is GRANTED as to the Programmatic Sales, the Other Distributions, and Larsen’s and Garlinghouse’s sales, and DENIED as to the Institutional Sales."
Federal district judge Analisa Torres ruled that programmatic sales to public buyers and distributions of XRP to Ripple Labs employees did not constitute the sale of unregistered securities.
The court did not address secondary market sales of XRP on cryptocurrency exchanges.
As Bitcoinist reports, according to the court ruling:
Institutional buyers who directly purchased XRP from Ripple had a reasonable expectation that their investment would contribute to improving the XRP ecosystem and increase the value of XRP.
However, programmatic buyers (meaning the broader public) accounted for less than 1% of global XRP trading volume, and the sales were “blind bid/ask transactions” where buyers could not have known if their payments went to Ripple or any other seller of XRP.
The court further noted that Ripple did not make any promises or offers concerning programmatic sales, as the company did not know who was buying the XRP, and the purchasers did not know who was selling it.
This provides much-needed regulatory clarity for the cryptocurrency industry and clarifies the legal status of XRP. However, the SEC may appeal the decision, and the legal battle is likely far from over.
Nonetheless, Ripple’s victory is a significant boost for the company, which has long argued that XRP is a legitimate cryptocurrency used for cross-border payments and not subject to SEC regulation.
[ZH: we do note, however, the summary judgment is a split decision in that the judge ruled that a crypto token sold to the public may be a security...
...so, crypto is a "schrodinger's security" - it depends on who is observing it?
The bottom line is that this ruling appears to offer a lot of leeway in the interpretation of whether a crypto token is a security.]
Furthermore, the court’s decision to cite the Howey test to determine whether XRP sales constituted investment contracts is a major blow to the SEC’s case.
The judge concluded that the SEC had failed to prove that XRP sales met the criteria for such contracts.
Within a matter of minutes after the news broke, the price of XRP has catapulted from $0.45 to $0.64. This puts the token up over 30% as of the time of this article's publishing.
As CoinTelegraph's Tristan Greene reports, the case against Ripple has been ongoing since December 2020 when the SEC sued Ripple and its two chief executives, Brad Garlinghouse and Chris Larsen over allegations the company was offering an unregistered security.
Over the past three years, the case has had its fair share of dramatic intrigue including the release of the "Hinman Documents" and ongoing defiance in the face of the SEC's accusations from Garlinghouse.
Along with the palpable movement demonstrated by the XRP token pumping on the news, the overall sentiment across the crypto community appears to be one of jubilation.
The SEC didn’t immediately respond to a request for comment on the decision. Garlinghouse seemed to claim victory in a tweet on Thursday.
“Thankful to everyone who helped us get to today’s decision – one that is for all crypto innovation in the US. More to come,” he wrote.
