- Ripple Labs has scored a historic win over the SEC in a landmark judgment.
- The court ruled that the sale of XRP on exchanges does not constitute investment contracts.
- XRP price has surged by double-digits since the judgment, trading at $0.8.
After nearly three years of legal drama, Ripple Labs has earned itself a hard-fought win against the U.S. Securities and Exchange Commission.
On July 13, Judge Analisa Torres granted a summary judgment in Ripple Labs’ favor, declaring that its XRP is not a security. The court added that the sale of XRP tokens on exchanges was insufficient to be construed as investment contracts, bringing the long-running case to its finale.
“Defendants’ motion for summary judgment is GRANTED as to the Programmatic Sales, the other Distributions, and Larsen’s and Garlinghouse’s sales, and DENIED as to the Institutional Sales,” read a copy of the judgment.
In reaching its decision, the court relied on the three prongs of the Howey test noting that while there was an investment of money and a common enterprise, institutional investments were expected to have a “reasonable expectation of profit.”
Within minutes of the judgment, XRP’s prices soared by nearly 30% to trade at $0.61, sending the community into a frenzy. Although largely positive for Ripple Labs, the judgment noted that the firm was in breach of federal securities regulations regarding the institutional sale of XRP tokens.
“We said in Dec. 2020 that we were on the right side of the law, and will be on the right side of history,” tweeted Ripple Labs CEO Brad Garlinghouse. “Thankful to everyone who helped us get to today’s decision – one that is for all crypto innovation in the U.S.”
Ripple Labs and the SEC have been embroiled in a legal tussle since 2020 when the securities watchdog accused the firm and its executives of selling unregistered securities to the public. Waiving away the option of settlement, Ripple Labs challenged the SEC in court in a case that kept the entire virtual currency space on its toes.
The case has seen several twists and turns since 2021, marked by the public release of the Hinman documents, containing a speech from an SEC director and several outbursts by Ripple Labs executives.
Ripple Labs will have to contend with the ruling that its institutional sales violated existing capital market rules but a bird’s eye view indicates a landmark win for the virtual currency community.
In the months leading to the decision, the SEC upped the ante against the industry, bringing a string of enforcement actions against several entities. In June, it charged Coinbase for operating as an unregistered securities exchange while moving against Blockfi, Nexo, and Kraken.
The SEC designated 10 digital assets as securities in its charge against Binance but the decision against the regulator could fuel industry stakeholders to launch a spirited fight against the SEC rather than reaching for a settlement