- A federal judge has determined that XRP is not necessarily a security.
- Based on the ruling, the Ripple Labs token can only be security when sold to institutional investors.
- While the news represents a partial win for the SEC, the XRP community is elated with 70% price gains to show for it.
- SOL, ADA, and MATIC, recently deemed securities, share in the excitement with around 10% gains each.
Ripple (XRP) price has recorded a remarkable rally following a much-anticipated development in the case against the US Securities and Exchange Commission. After months of waiting, the XRP community is celebrating a partial win against the commission.
XRP is not a security on this condition
XRP, the ticker for the Ripple ecosystem, has been determined to be a commodity when sold to the general public. According to the latest determination by Federal Court Judge Analisa Torres, the remittance token only passes as a security when sold to institutional investors. An excerpt from the summary judgment reads:
Therefore, having considered the economic reality and totality of circumstances surrounding the Institutional Sales, the court concludes that Ripple's Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act.
The ruling comes at the least expected time, on July 13 during the US session, sparking a 30-fold rally in Ripple price. It comes hours after pro-XRP lawyer John E Deaton noted the delay, addressing holder concerns and saying there was nothing strange about it.
SO MANY PEOPLE CLAIMING SOMETHING IS STRANGE BECAUSE THE RIPPLE DECISION IS ALLEGEDLY TAKING UNUSUALLY LONG.— John E Deaton (@JohnEDeaton1) July 10, 2023
Here are some FACTS to consider before putting your tinfoil hat on jumping to conclusions.
A dissection of the court's determination reveals one key insight: XRP's programmatic sale on exchanges failed to meet the third prong of Howey. This segment "examines whether the economic reality surrounding Ripple's institutional sales led the institutional buyers to have a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others."
This means selling the token to users on the exchanges was not in contravention of the law, but only when they purchased through an order book and not via an Initial Coin Offering (ICO), Initial Exchange Offering (IEO), or Launchpad-related selling.
Notably, the development comes on the back of a final verdict in the SEC vs. LBRY case, which raised concerns in the community of XRP holders.
XRP victory bodes well for ADA, SOL, MATIC
XRP partially winning against the commission has boded well for altcoins recently labeled securities. Specifically, Cardano (ADA), Solana (SOL), and Polygon (MATIC) prices have soared around 20%, each following the breaking news.
XRP/USDT 1-Day Chart, SOL/USDT 1-Day Chart, ADA/USDT 1-Day Chart, MATIC/USDT 1-Day Chart
At the time of writing, Ripple price is $0.601, reclaiming levels last seen in May 2022 before the Terra ecosystem collapse swept the markets to unprecedented losses. The token has breached crucial barriers, flipping them into support while leaving XRP naysays out of the 70% gains.
Why the ruling is a partial win for the SEC
Nevertheless, while there is cheer and excitement in the XRP, ADA, SOL, and MATIC camps, the long-awaited ruling is not without implications. Since Judge Analisa said the remittance token was a security only when sold to institutional investors, it leaves the door open for regulatory enforcement over other cryptocurrencies.
As such, the judge says the case may proceed to court.
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