• The US SEC has responded to Judge Torres' decision about XRP not being a security.
  • The response comes after Judge Torres drew a line between token sales to institutional investors and the general public.
  • Based on the comment, the commission remains on course, with plans to review the decision.

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.

SEC vs Ripple lawsuit FAQs

Why are the US Securities and Exchange Commission and Ripple litigating?

The United States Securities and Exchange Commission (SEC) brought charges against Ripple and its executives alleging that the cross-border payment settlement firm raised more than $1.3 billion through an unregistered asset offering of the XRP token. Ripple argues that XRP should not be treated as a security or an investment contract, just like the SEC looks at Bitcoin or Ethereum, citing views from former SEC Director of Corporation Finance William Hinman.

When did the SEC vs. Ripple court case start?

The SEC charges were made public in December 2020. The long-running litigation, presided by Judge Analisa Torres, seems to be close to its end as both parties fail to reach an agreement.

What are the effects on XRP price?

Ripple is the largest holder of the altcoin XRP. The SEC’s charges against Ripple resulted in a mass delisting of XRP across crypto exchange platforms and a sharp decline in the token’s value, which used to be the third crypto asset by market capitalization after Bitcoin and Ethereum. A positive outcome for Ripple in its case against the SEC would benefit XRP’s price, while a SEC win is likely to weigh further on the asset, experts say.

Which implications could the ruling have on the overall crypto industry?

The final verdict in the SEC vs. Ripple lawsuit is the most highly anticipated in the crypto ecosystem. The lawsuit is expected to set precedent for other open cases that affect dozens of digital assets. A ruling in favor of the SEC would most likely bring further regulation to the sector as it would classify most tokens as securities. On the contrary, Ripple’s win would be interpreted as a validation of the crypto markets and could boost investors' confidence if current legal uncertainties surrounding digital assets in the US are solved.

What about secondary sales of XRP among traders?

The ruling may also include views over XRP secondary sales, which directly affects investors who trade XRP on cryptocurrency exchange platforms. Pro-Ripple attorney John Deaton, who filed an amicus brief in the SEC vs. Ripple case, suggests this matter is likely to be addressed. A ruling stating that secondary sales don't qualify as securities, contrary to what the SEC claims, is likely to be beneficial for XRP.


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