By Ryan Prete, Jul 13, 2023
The landmark case between Ripple and the Securities and Exchange Commission (SEC) has come to a close with Ripple securing a significant win. U.S. District Judge Analisa Torres ruled that Ripple’s premier token, XRP, does not classify as a security when sold to the general public. However, XRP’s sale to institutional investors, totaling $728.9 million, has been deemed as unregistered sales of securities. This case has been a focal point in cryptocurrency headlines, stirring great interest from investors and the crypto community.
In her ruling, Judge Torres stated there was no evidence that such investors [the general public] could parse the many statements made by Ripple about XRP.
Brad Garlinghouse, Ripple’s CEO, expressed his gratitude and optimism following the ruling, tweeting, “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.”
XRP’s price surged over 75% in the hours following the ruling.
In its decision, the court noted that “having considered the economic reality of the Programmatic Sales, the Court concludes that the undisputed record does not establish the third Howey prong.”
“Since 2017, Ripple’s Programmatic Sales represented less than 1% of the global XRP trading volume. Therefore, the vast majority of individuals who purchased XRP from digital asset exchanges did not invest their money in Ripple at all. An Institutional Buyer knowingly purchased XRP directly from Ripple pursuant to a contract, but the economic reality is that a Programmatic Buyer stood in the same shoes as a secondary market purchaser who did not know to whom or what it was paying its money.”
“Therefore, having considered the economic reality and totality of circumstances, the Court concludes that Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts.”
This legal victory for Ripple is also significant for other cryptocurrencies companies currently facing litigation from the SEC. The outcome of this case could set a precedent for future litigation involving cryptocurrencies and securities laws.
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Joe Endoso, COO of Linqto, a leading platform for private market investments, emphasized the impact of this ruling on the cryptocurrency industry, stating “The recent ruling represents a significant victory not just for Ripple, but for the broader cryptocurrency industry as well. It offers much-needed clarity for investors navigating through the complex landscape of digital assets. This promising decision sets a definitive path for Ripple’s future and could potentially drive a positive surge in its share price within the private market. For the past three years, we have proudly hosted Ripple investments on our platform, a testament to our unwavering confidence in the long-term prospects of the company. We want to take this opportunity to invite accredited investors to capitalize on the current possibilities for investing in Ripple, ahead of any forthcoming liquidity events. These exciting times, underscored by progress and a favorable legal outcome, are ideal for those keen on contributing to and participating in Ripple’s ongoing growth and value realization.”
The SEC’s blockbuster case against Ripple has been atop cryptocurrency headlines since December 2020, when the SEC first brought a lawsuit against Ripple, Garlinghouse, and executive Chris Larsen, alleging that the company was conducting unregistered securities transactions with their XRP token.
Over the years, the case has attracted substantial interest from a broad spectrum of investors. The release of the “Hinman Documents” and the persistent defiance of the SEC by cryptocurrency executives has served to fuel the prominence and intrigue surrounding the case.
Further, scores of cryptocurrency companies rallied to file amici briefs in support of Ripple, which in turn cast a shadow of doubt and bred frustration over the SEC’s ongoing procedures.
This landmark decision carries far-reaching implications, potentially serving as a significant obstacle for major cryptocurrency entities like Binance and Coinbase, who are also navigating litigation from the SEC.
We will have more updates on the XRP ruling as we continue to provide timely information as it becomes publicly available.
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This material, provided by Linqto, is for informational purposes only and is not intended as investment advice or any form of professional guidance. Before making any investment decision, especially in the dynamic field of private markets, it is recommended that you seek advice from professional advisors. The information contained herein does not imply endorsement of any third parties or investment opportunities mentioned. Our market views and investment insights are subject to change and may not always reflect the most current developments. No assumption should be made regarding the profitability of any securities, sectors, or markets discussed. Past performance is not indicative of future results, and investing in private markets involves unique risks, including the potential for loss. Historical and hypothetical performance figures are provided to illustrate possible market behaviors and should not be relied upon as predictions of future performance.
Ryan is a financial writer for Linqto, known for his original blog content, articles, and other works. He previously worked as a financial writer at PitchBook Data, where he covered private equity, and as a reporter for Bloomberg in Washington D.C.,where he reported on tax policy. Ryan has also reported on cybersecurity policy for Inside Washington Publishers. His work has been featured in The Wall Street Journal, Axios, Yahoo News, and Reuters. He is a graduate of the University of California, Santa Barbara.
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