In a significant ruling, Judge Analisa Torres of the Southern District of New York has declared that XRP is not a security, handing a victory to Ripple in their legal battle against the U.S. Securities and Exchange Commission (SEC). The decision has far-reaching implications for the cryptocurrency market, providing potential regulatory clarity in the United States.
The Verdict and its Implications
Judge Torres concluded that XRP does not meet the definition of a security, stating that its sale is not an investment contract. This has sparked renewed calls for XRP to be relisted on prominent U.S. exchanges, including Coinbase.
However, it’s important to note that the court also ruled that institutional sales of XRP may still be considered as the sale of unregistered securities. Legal experts caution that Ripple and XRP holders may still face challenges, as the SEC retains the ability to appeal the lawsuit and raise concerns regarding the expectation of profits from third-party efforts.
The SEC Lawsuit and Ripple’s Defense
In December 2020, Ripple was hit with a lawsuit by the SEC, alleging that the company violated securities laws by selling $1.3 billion worth of XRP tokens since 2013. The SEC relied on the Howey test to argue that XRP should be classified as a security.
Ripple’s defense team countered the allegations, accusing the SEC of overstepping its authority. A crucial point in the legal proceedings was the inclusion of documents related to former regulator William Hinman. The court rejected the SEC’s motion to exclude these materials, marking a major win for Ripple.
Hinman’s Speech and its Impact
Of particular significance was the court’s decision to make public a recording of William Hinman’s speech in June 2018, where he stated that Ethereum’s native token, ether (ETH), should not be considered a security. These documents played a pivotal role in the case and further contributed to Ripple’s successful defense.
The Path Ahead and Potential Appeals
While Ripple celebrates the recent ruling, legal experts anticipate that the SEC may appeal to the Second Circuit without delay. The litigation between the SEC and Ripple is not yet fully resolved, and future proceedings will determine whether Ripple’s executives facilitated an unregistered issuance.
Market Response and XRP’s Performance
Following the ruling, the global cryptocurrency market experienced a surge, with a 5.76% increase in the past 24 hours. XRP, in particular, witnessed a significant boost, with its price soaring by approximately 73% and securing a place among the top four cryptocurrencies by market capitalization.
Conclusion
The court’s decision not to classify XRP as a security represents a pivotal moment for Ripple and the broader cryptocurrency industry. However, while Ripple emerges victorious, further legal battles and uncertainties lie ahead. The ruling sets the stage for a potential bull rally, with the market showing positive signs and XRP’s price experiencing notable growth.
