Opinion: Unpacking Ripple’s landmark victory against the SEC
By Edan Yago, founder of Sovryn.
On July 13th, blockchain payment solution Ripple’s historic win against the SEC, in which the United States District Court in the Southern District of New York’s said that Ripple’s XRP token “is not necessarily a security on its face,” accounted for the first real blow to the agency’s continued efforts to crack down on the crypto community at large.
The case against Ripple Labs Inc., a prominent supplier of blockchain and cryptocurrency solutions for businesses, saw Judge Analisa Torres rule that the “offer and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts,” as “the record cannot establish the third Howey prong to these transactions.”
As a result of the ruling, Ripple’s XRP token surged by 96% (as high as 93.8 cents), its highest level since March 2022, and gave huge hope to crypto investors who had been waiting for the ruling with bated breath. Other cryptocurrencies got a boost too, with Bitcoin and ether rising between 4% and 6%, Polygon’s matic token gaining 17%, Litecoin and Solana rising by 18%, and Cardano by 20%. Ripple, which had been previously de-listed from Coinbase, will now be traded on the platform once more. Gemini might follow suit.
But what does Ripple’s landmark victory mean for the greater crypto community? Ripple CEO Brad Garlinghouse called the ruling “a huge win for Ripple but more importantly for the industry overall in the U.S.,” and I can’t help but agree.
I believe that what happened last week is a huge blow to the SEC’s theory that the regulation is clear and that all tokens are securities. Judge Analisa Torres has quite clearly taken the view that tokens are not securities and that token trading on exchanges is not the trading of securities, which is also a blow to the SEC’s view that crypto exchanges are securities exchanges and need to be regulated as such.
Although the question of what constitutes a security under US law is still up for debate, we’re beginning to get a sense of what the next few months may look like for the industry and its development.
We can also expect Ripple’s victory to be a point of reference for some, if not most, of the other ongoing cases involving the SEC and the crypto community. As Senior Judge at the Southern District of New York, Judge Torres will also be somewhat instrumental to the Coinbase trial taking place at the same court. The presiding judge over this case is a Junior Judge to Judge Torres, which could mean that the precedent now set is likely to be extremely impactful.
In the Coinbase case, the SEC charged the cryptocurrency exchange platform with “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency,” and additionally for “failing to register the offer and sale of its crypto asset staking-as-a-service program.”
If we follow the line of thinking that Judge Torres privileged during the Ripple trial, we can conclude that the same principle may be followed in the Coinbase case — an overall very significant blow to the argument that tokens are securities, and concrete ammunition for every crypto firm who may come to need it.
Ripple’s victory was the first win for a cryptocurrency company in a case brought by the SEC, but it very well may not be the last.
Edan is an experienced entrepreneur and seasoned veteran of the digital currency world. Yago was CEO & Founder of Epiphyte, a leading company helping banks integrate with distributed ledgers. Yago has a wealth of experience in the digital asset space. He has led digital currency initiatives at Zynga and was a founding member of DATA, the leading digital asset industry regulatory body. Yago is an angel investor and advisor to several Bitcoin companies and is a sought-after speaker and thought leader in the space. He’s now running Sovryn, a decentralized trading and lending platform.
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