Ripple, the company that issues the Ripple (XRP) cryptocurrency and the fifth-largest company in the world by market capitalization, has won a long-running legal battle with the U.S. Securities and Exchange Commission (SEC).
What’s the legal ruling?
On July 13, U.S. District Court Judge Analisa Torres announced that she had “dismissed the SEC’s lawsuit against Ripple for being an illegal security.” Specifically, she clarified that “Ripple’s sale of Ripple to retail investors on exchanges did not violate federal securities laws.”
Judge Torres’ opinion
Judge Torres ruled that “sales to retail investors on (cryptocurrency) exchanges are not subject to securities laws” because “investors cannot have a reasonable expectation of return on Ripple.”
However, the court found that Ripple’s sale of Ripple to institutional investors such as hedge funds violated federal securities laws.
SEC vs. Ripples
In December 2020, the SEC filed a lawsuit against Ripple and their CEO after determining that Ripple was an illegal security that did not go through the proper public offering process under the law. Ripple’s rebuttal, arguing that Ripple is a commodity and not a security, centered on whether Ripple is subject to federal securities laws as a security.
The SEC is reportedly currently reviewing the appeal.
Ripple’s surge after the ruling
Following the news of the win, Ripple’s value in the cryptocurrency market skyrocketed. As of 6:40 p.m. ET, the value of one Ripple was trading at $0.82, up 73.93% from the previous day.
Future impact
The ruling is expected to be a turning point for other cases brought by the SEC. Notably, last month, the SEC filed a lawsuit against Coinbase, the largest cryptocurrency exchange in the United States, alleging that at least 13 cryptocurrencies sold on the exchange constitute “securities.
In conclusion, Ripple Labs has won an important victory, which could provide precedent for future cases involving cryptocurrency and securities laws.
