Ripple Labs achieved a landmark legal victory as a US judge ruled that the company did not violate federal securities law by selling its XRP token on public exchanges. This decision had a significant impact on the cryptocurrency industry, leading to a surge of more than 50 percent in the value of XRP.
Read: The Last of Us series nominated for 24 Emmy awards
The ruling by US district judge Analisa Torres marked the first win for a cryptocurrency company facing a case brought by the US Securities and Exchange Commission (SEC). While specific to the circumstances of this case, it may serve as a precedent for other crypto firms contesting the SEC’s jurisdiction.
Ripple CEO Brad Garlinghouse hailed the ruling as a huge win for both Ripple and the overall cryptocurrency industry in the US. The SEC had accused Ripple and its CEOs of conducting a $1.3 billion unregistered securities offering through the sale of XRP.
The case has been closely watched as it challenges the SEC’s assertion that most crypto tokens are securities. Judges in previous cases have generally agreed with the SEC’s view. However, in this ruling, Judge Torres concluded that Ripple’s sales of XRP on public exchanges were not offers of securities because purchasers did not expect profit tied to Ripple’s efforts.
Torres applied a US Supreme Court case that defines an investment contract as “an investment of money in a common enterprise with profits to come solely from the efforts of others.” She ruled that XRP sales on cryptocurrency platforms and other distributions did not involve securities.
However, the SEC did achieve a partial victory as Torres found that Ripple’s sales of XRP to sophisticated buyers constituted unregistered sales of securities. The judge emphasized that Ripple’s marketing targeted institutional investors, promoting the speculative value proposition of XRP tied to the company’s efforts.
While this ruling is significant, it is subject to appeal once a final judgment is issued. The SEC spokesperson confirmed that the agency is reviewing the decision and considering its options. The outcome of any appeal or subsequent legal developments could impact the regulatory landscape for cryptocurrencies in the US.
