SEC Lawsuit!
On Thursday, July 13th, Judge Analisa Torres made a significant turn in the long-running Ripple case involving the US SEC. In her ruling, the judge noted that XRP, the project’s native token, is “not a security.”
This development sparked excitement in the cryptocurrency community. XRP, which had been in a state of consolidation for weeks, immediately began a continuous rally. Despite the progress recorded on the matter, Ripple may still need to pay attention to the regulator’s next steps. But before that, let’s take a quick look at what led to the Ripple case in the first place.
Ripple’s troubles began in 2020 when the SEC alleged that the blockchain company had sold XRP as an unregistered security for $1.4 billion. As Ripple fought to address the allegations, the SEC claimed that the company violated securities laws.
According to the recent ruling, Judge Torres partially sided with the SEC because she recognized the sales to institutions as investment contracts. One of the main reasons the SEC went after Ripple and XRP was that the token passed the Howey Test.
Under the 1933 US Securities Act and the 1934 Securities Exchange Act, the Howey Test is used to determine whether an asset is an investment contract. For an asset to be considered a security, it must involve a common enterprise with an expectation of profit.
Ripple’s Success!
However, Ripple’s repeated argument that XRP is not a security did not stop the SEC from pursuing its legal actions. Nevertheless, recently disclosed William Hinman emails seemed to support Ripple’s claim.
In the emails, the former SEC Director of Corporation Finance discussed that Bitcoin (BTC) and Ethereum (ETH) are not securities. Interestingly, some of his comments appeared to be helpful to Ripple’s defense. And as expected, the company did not miss the opportunity to use it as evidence.
Now that Ripple has gained an advantage, CEO Brad Garlinghouse stated that all he needs is a statement declaring that XRP is not a security. Therefore, Garlinghouse also mentioned that the case may not go to trial. However, there are speculations that the SEC will appeal the decision. According to SEC Regional Director Marc Fegel, Ripple’s celebration could be short-lived.
