In a recent court battle between the cryptocurrency industry and U.S. regulators, the industry secured an early victory. A federal judge ruled that the sale of a digital asset called XRP on public exchanges complied with securities laws. This ruling may complicate the Securities and Exchange Commission’s (SEC) argument that digital assets should be subject to the same regulations as traditional securities.
The SEC has long maintained that digital assets, like stocks and bonds, should be treated as securities and regulated accordingly. Last month, the SEC sued two major crypto exchanges, Coinbase and Binance, accusing them of marketing unregistered securities. However, the ruling in the case involving Ripple, a crypto company, may provide ammunition for the industry’s defense in court.
The SEC initially sued Ripple in December 2020, alleging that the company violated securities laws. In the recent 34-page ruling, Judge Analisa Torres stated that Ripple did not break the law when it sold XRP on public exchanges.
While the ruling is a victory for the cryptocurrency industry, it’s not a complete one. Judge Torres also found that Ripple violated securities law by selling XRP to institutional investors. The SEC spokesperson stated that they are reviewing the decision and expressed satisfaction with the court finding that XRP was offered as an investment contract in violation of securities laws in certain circumstances.
Ripple, founded in 2012, aimed to make international payments easier using the XRP token. Over the years, XRP became one of the most valuable cryptocurrencies, but the SEC’s lawsuit had a negative impact on the company, leading some exchanges to cease listing XRP for sale.
Industry executives eagerly anticipated a resolution in the case, and many celebrated Judge Torres’ ruling as an important victory. However, it’s important to note that this ruling does not guarantee success for the industry in other cases. The lawsuits against Binance and Coinbase are still ongoing, and different judges will determine whether the sale of their respective digital assets violated securities laws.
While the crypto industry is pleased with this recent ruling, the outcome of future cases remains uncertain. Gary Gensler, the SEC chair leading the government’s oversight of the industry, is still dedicated to regulating cryptocurrencies. Only time will tell how these legal battles will shape the future of the cryptocurrency industry.
