Judge Analisa Torres of the U.S. District Court for the Southern District of New York ruled on Thursday that the sale of Ripple’s XRP token on public exchanges complied with securities laws, giving the cryptocurrency industry an early victory in its court battle against U.S. regulators. This ruling is significant as it challenges the Securities and Exchange Commission’s long-standing argument that digital assets should be subject to the same strict regulations as securities traded on Wall Street.
The SEC has been actively pursuing legal action against various cryptocurrency exchanges, accusing them of marketing unregistered securities to the public. However, Judge Torres’ ruling in the case involving Ripple may complicate the SEC’s argument and provide ammunition for the crypto industry to defend itself in court.
Ripple, which was founded in 2012, created the XRP token with the aim of facilitating easier international payments. Over the years, XRP became one of the most valuable cryptocurrencies, but the SEC’s lawsuit cast a shadow over Ripple, leading some exchanges to delist XRP.
While the ruling brought relief to the crypto industry, it was not a complete victory. Judge Torres determined that Ripple had violated securities laws when selling XRP to institutional investors. The SEC acknowledged this aspect of the ruling and stated that it was pleased that the court found certain circumstances in which XRP tokens were offered and sold as investment contracts in violation of securities laws.
The outcome of this case is expected to have wider implications for the crypto industry, as it challenges the SEC’s regulatory approach and campaign of “regulation by enforcement.” Stuart Alderoty, Ripple’s chief legal officer, hailed the decision as a win for the broader crypto industry, emphasizing the importance of imposing appropriate checks and balances on the SEC.
Although this ruling is seen as a significant victory, it does not guarantee success for the crypto industry in other ongoing cases. Separate determinations will have to be made by judges in lawsuits against exchanges such as Binance and Coinbase, where the SEC argues that a range of cryptocurrencies also constitute securities.
Despite the uncertain legal landscape, prominent figures in the crypto industry celebrated Judge Torres’ ruling as an important step forward. Paul Grewal, the chief legal officer at Coinbase, expressed his satisfaction with the outcome, while Tyler Winklevoss, one of the founders of the Gemini exchange, bid farewell to SEC Chair Gary Gensler, who has been leading the government’s crackdown on the crypto industry.
The crypto industry will closely watch the developments in forthcoming cases and continue to advocate for clearer regulations that strike the right balance between investor protection and fostering innovation.