Ripple Wins

A lawsuit nearly four years in the making has finally come to a close and the impacts are already rippling throughout the crypto markets.

On Thursday of last week, Ripple Labs defeated a significant part of the SECs landmark case over its sale of more than $1.4 billion worth of the popular XRP cryptocurrency.

Ripple Labs had spent hundreds of millions of dollars arguing that more than half of its token sales did not violate investor protection laws, and that XRP is simply a token developed to facilitate cross-border payments. In short, Ripple Labs argued that XRP is not a security. And, surprise surprise, U.S. District Judge Analisa Torres agrees.

A Small Caveat

To clear up any confusion, let’s quickly discuss what the part about “more than half of its token sales” means.

It turns out that although the judge agreed that sales on exchanges (i.e. retail trading) do not violate the Howey test (a legal test used in the United States to determine whether a transaction qualifies as an investment contract), other sales did violate securities laws. But, these violations were primarily around institutional sales.

You see, the judge put XRP sales into three distinct buckets:

• Institutional sales (illegal): The judge stated that because Ripple provided institutions investment materials and contracts, it indicated an investment intent rather than a consumptive focus.

• Programmatic sales (legal): These are simply sales of XRP on exchanges. The judge ruled that individuals had no way to know who they were buying the tokens from and furthermore there is no proof they were buying them for investment purpose. 

• Other distributions (legal): These are things like paying for services in XRP from Ripple.

But to cut to the chase…

Here Is All That You Need To Know

Overall, the ruling concludes that the way XRP was sold in certain circumstances is illegal, but that XRP itself is not a security.

Perhaps to put it even more simply, the XRP token is NOT a security, but certain transactions of the token can be.

As a result, the crypto market rallied with the price of XRP rising more than 70% and Coinbase (COIN) shares rising 25% after the decision was issued.

Honestly, the entire market moved higher after the news.

If XRP is deemed not a security, others (like SOL) could be deemed not a security as well. Beyond the brighter regulatory clarity (and a step toward better token classification), the ruling gave a short-term green light around sales via exchanges.

It’s why exchanges like Coinbase, Kraken, and Gemini, quickly re-listed XRP after the ruling was determined.

As we wrote 10 months ago when it looked like the lawsuit was coming to a close: