Federal court rules Ripple’s XRP token can be treated as a security… sometimes

SDNY Judge Torres rules XRP token is a security for institutional sales, but not for public sales

The saga of Ripple Labs, the XRP token and whether the sale of its crypto token constituted a securities law violation in the U.S. advanced today. In a ruling from the U.S. District Court of the Southern District of New York, Judge Analisa Torres gave a nuanced view on the matter.

In summary, after examining several different sales methods of the XRP token over time, and applying the Howey Test to each, the district judge approved the SEC’s motion for summary judgment with regard to the institutional sale by Ripple of the XRP token. This means XRP is a security when it’s used for institutional sales, according to Torres.

But, in an interesting twist, the judge then denied the SEC’s request for summary judgment as it related to programmatic sales of XRP, among other circumstances, including sales by two of the company’s former and current leaders. This means she ruled XRP is not a security when it’s sold to the broader public.

Basically, the verdict is a double-edged sword, but most of the crypto community is viewing it in a positive light, probably because they are mostly retail investors invested in the non-security side of the ruling.

For context, the SEC case against Ripple has been in court since December 2020, when the agency sued the company and its two executives Brad Garlinghouse and Chris Larsen for raising $1.3 billion in an alleged “unregistered, ongoing digital asset securities offering.”

The SDNY’s ruling comes as the SEC is ramping up enforcement actions against entities that it considers ran afoul of securities law in the United States, filing suits against international players in the crypto market, including Binance, and domestic companies, including Coinbase.

This new ruling makes it clear that beyond the SEC, there are other agencies who view some activity in the crypto world as illegal, even if they do so less broadly than the SEC itself.

In the wake of the mixed ruling, XRP’s value rose 28% to 60 cents at the time of reporting. The last time that the token was worth so much was May 2022.

Why is the value of XRP rising when it did not achieve a complete legal reprieve? The legal risk of today’s ruling for XRP and Ripple Labs may be less than some investors feared, or perhaps an even partial win for XRP was better than anticipated. Either way, for holders of XRP, the judge’s decision is driving profits.

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