XRP soared as much as 61% on Thursday after a US judge said certain aspects of the sale of the token did not break federal securities laws.The SEC had sued Ripple for the sale of its XRP token in 2020 for the failure to register XRP as a security.Crypto related stocks like Coinbase and Riot Blockchain soared more than 10% following the news. Loading Something is loading.
Thanks for signing up!
Access your favorite topics in a personalized feed while you’re on the go.
XRP soared as much as 61% on Thursday after a US judge ruled that certain trades of Ripple’s crypto token did not constitute the sale of a security.
Ripple, its CEO Brad Garlinghouse, and its co-founder Christian Larsen, were sued by the SEC in 2020 for the alleged failure to register its sale of $1.4 billion of XRP tokens as securities. Since then, the company has been entangled in a drawn out lawsuit that could have a big impact on the broader crypto industry going forward.
US District Judge for the Southern District of New York Analisa Torres said the XRP token is “not necessarily a security on its face.”
“XRP, as a digital token, is not in and of itself a ‘contract, transaction{,} or scheme’ that embodies the Howey requirements of an investment contract,” Torres said.
But there are multiple facets of the ruling and it gets complicated depending on the type of sale of XRP.
The key differentiator in the ruling is whether the sale of the XRP token was directly from Ripple to institutional investors, or if it was a secondary sale on a crypto exchange.
The judgement said that programmatic sales through algorithms on various crypto exchanges were not investment contracts, which was a big win for Ripple.
“There is no evidence that a reasonable Programmatic Buyer, who was generally less sophisticated as an investor, shared similar ‘understandings and expectations’ and could parse through the multiple documents and statements that the SEC highlights,” Torres said.
A motion for summary judgement filed by the SEC in its “aiding and abetting” allegations against Garlinghouse and Larsen was denied. The court said it “is not clear whether Larsen and Garlinghouse knew or recklessly disregarded that securities laws, rather than laws under other regulatory regimes, applied to XRP.”
Garlinghouse reacted to the ruling on Twitter.
“We said in Dec 2020 that we were on the right side of the law, and will be on the right side of history. Thankful to everyone who helped us get to today’s decision – one that is for all crypto innovation in the US. More to come,” Garlinghouse tweeted.
However, the judgement also said that the institutional sale of the tokens did break federal securities laws as the buyers likely expected to profit off of their purchase.
Ripple had sold nearly $730 million of XRP tokens directly to hedge funds and other institutional investors, and the company used the funds from the sale to develop its crypto ecosystem.
Investors are no doubt excited about the court developments. Aside from XRP, crypto-related stocks like Coinbase and Riot Blockchain soared more than 10%, while ether jumped more than 5% and bitcoin jumped about 2%.