13th July, 2023: In the ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple, there have been recent developments that have significant implications for the cryptocurrency industry as a whole, particularly for altcoins and specifically XRP.

The initial judgment determined that institutional sales and fundraising conducted by Ripple were considered securities. However, it was concluded that the programmatic sale of XRP on exchanges did not meet the criteria outlined in the Howey Test’s third prong, which is used to determine whether an investment qualifies as a security.

As a result, sales of XRP to users through order books on exchanges were deemed permissible, as long as they were not conducted through Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs), or similar launchpad platforms.

Moreover, certain activities involving XRP were explicitly excluded from being classified as securities. These activities include bounties, investments in other projects using XRP, grants using XRP, and transfers of XRP to executives. This distinction further supports the positive outcome for Ripple and XRP, suggesting that these types of transactions can continue without being subject to securities regulations.

The implications of this ruling extend beyond Ripple and XRP. The decision recognizes the importance of distinguishing between sales conducted through exchanges and those performed via private rounds or over-the-counter (OTC) transactions. It essentially implies that sales made through public order books, such as exchanges, should not be considered securities, unlike offerings involving institutional investors, private rounds, or direct token sale raises.

This outcome serves as a significant win for XRP and Ripple, as it reaffirms the legitimacy of their operations and provides a precedent for other cryptocurrencies and blockchain projects. By highlighting the viability of selling tokens via exchanges and distributing them natively through the protocol, the ruling encourages a more decentralized and accessible approach to token sales.


Earlier (till October 2, 2022):

Ripple in pursuance of summary judgement in order to speed up the SEC vs XRP Lawsuit

The Ripple Labs Inc and U.S. Securities and Exchange Commission.

In an effort to end the lawsuit which was filed by SEC in December 2020, Ripple requested a summary judgement to end It without a trial.

Both the Ripple and U.S. markets regulators submitted motions to Judge Analisa Torres of the U.S. District Court for the Southern District of New York requesting her to provide a summary judgement, which is a decision made based on statements and evidence without a full trial.

In December 2020, the SEC filed a lawsuit against Ripple, alleging that the business fraudulently generated about $1.4 billion by selling XRP in violation of investor protection laws, while its co-founder and CEO, who the SEC also sued, made hundreds of millions of dollars in trading profits. According to the firm, XRP is used to make foreign payments and is not an investment subject to SEC regulation.

For the past five years, the SEC has been grappling with the question of how to define cryptocurrencies as securities or not. Both Gary Gensler, the current commissioner, and prior SEC commissioner Jay Clayton have stated that the majority of digital currencies are in reality securities that need to be registered with the federal body.

The securities commission noted in the Saturday filing that Ripple did not contest that they issued and sold XRP in return for “money,” which the SEC claimed fits the “investment of money” component of the Howey test — which alludes to a U.S. Supreme Court decision used to determine whether an asset can be labelled a security.

An investment agreement “occurs when money is invested in a joint project with a realistic prospect of benefit from the work of the others,” says the Howey test, according to the SEC website.

Ripple continued by claiming that numerous assets are acquired with the intention of reselling at a greater cost without becoming securities and that although few investors purchased XRP for speculative motives, this does not constitute it an investment agreement.

Regarding this, Ripple stated that there is no proof that would allow a rational fact-finder to infer that buyers of XRP anticipated gains from Ripple’s efforts.

At the time of updating this article (13th July, 2023 – 21:36PM Indian Time), according to CoinMarketCap, XRP is traded at $0.5879, with a marketcap of $31,093,939,761 at 11:00am Indian Standard Time.