SEC vs Ripple: Regulator slams Judge Torres' judgement that XRP is not a security

The US Securities and Exchange Commission (SEC) has responded to the ruling by Judge Torres, after the landmark judgement of the US session on July 13. This came after the much-awaited summary judgment in the Ripple versus SEC case. As it happened, the overseeing Judge, Analisa Torres, ruled that XRP was not a security in certain circumstances.

Also Read: XRP naysayers miss out on 70% gains after Ripple Labs and SEC share joint victory

SEC responds to shared win with Ripple

The US SEC took a partial win home and lives to fight another day. After backlash and ridicule from XRP community members, the commission has indicated its stand following the Court’s decision. Based on the remarks reported by Fox Business, the SEC may be taking the case further. Citing a portion of the response,

We will continue to review the decision.

Nevertheless, the agency acknowledges a victory of its own after the Judge established that Ripple “offered and sold” the tokens “as investment contracts in violation of the securities laws in certain circumstances.”

Based on the Court’s determination, Ripple violated the securities laws when selling XRP to institutional investors. Judge Torres gave them a pass for selling the asset to the general public.

Citing the chief legal officer at Ripple, Stuart Alderoty,

A huge win today – as a matter of law - XRP is not a security. Also, a matter of law - sales on exchanges are not securities. Sales by executives are not securities. Other XRP distributions – to developers, charities, and employees- are not securities. The only thing the Court found constitutes an investment contract is past direct XRP sales to institutional clients. There will be further court proceedings only on these institutional sales per the Court’s order. 

Noteworthy, a summary judgment perusal shows the Court agreed with the commission that the Howey test governs the securities analysis of cryptocurrency transactions. The Court also denied Ripple’s analysis of what constitutes an investment contract.

Nevertheless, the Court’s decision has made it clear that the SEC does not have unrestricted jurisdiction over crypto, perhaps explaining the crypto market hype. Kraken and Coinbase exchanges have already heeded Ripple lawyer John Deaton’s call to action that exchanges list or re-list XRP as a show of solidarity for the ruling.

This indicates the cause that the crypto industry is fighting for, with crypto executives like Binance CEO congratulating the Ripple camp for the win.

What Ripple’s ruling means for the broader crypto community

For one, it obliterates the commission’s case against Coinbase, which sold 13 tokens labeled as securities through the exchange and not in launchpad’s such as ICOs or IEOs.

Nevertheless, CoinDesk columnist Preston Bryne opines that the July 13 ruling only assures crypto issuers of continued uncertainty that only Congress can correct.

For now, however, vindicated that Gensler no longer has sole jurisdiction over them, altcoins flash green after the news of the ruling broke out, suggesting a buying frenzy that saw XRP naysayers miss out on 70% gains while Solana (SOL), Polygon (MATIC) and Cardano (ADA) holders raked in around 20% in profit.

The SEC's statement commented on Ripple's partial win and how the test proposed by the defendant was rejected by the court. The agency is set to review the decision and this leaves room for a trial in the future.