The crypto industry won a major victory in court on Thursday, with a federal district judge ruling that the sale of XRP on public exchanges was in compliance with securities laws. This decision could complicate the Securities and Exchange Commission’s (SEC) argument that digital assets should be subject to strict regulations, like stocks and bonds.
In December 2020, the SEC sued Ripple, accusing the firm of violating securities law when they sold XRP to institutional buyers. The 34-page decision by Judge Analisa Torres of the U.S. District Court for the Southern District of New York found that Ripple had not violated the law when selling XRP on public markets.
The ruling was not an absolute victory for the industry, as Judge Torres also found that Ripple had violated securities laws by selling XRP to institutional buyers, such as sophisticated hedge funds. The SEC released a statement saying they were reviewing the decision, noting that the court found XRP tokens were offered and sold by Ripple as investment contracts in violation of the securities laws in certain circumstances.
Ripple, which was founded in 2012 by a group of developers including Chris Larsen, has become one of the most popular cryptocurrencies in the world. Despite the SEC’s lawsuit, Ripple developed a loyal following online.
Crypto industry executives celebrated the outcome of the case as an important victory, with Coinbase Chief Legal Officer Paul Grewal writing on Twitter, “Most days I love being a lawyer. Today is one of them.” Tyler Winklevoss, a founding member of the Gemini exchange, tweeted, “Adios Gary,” a reference to SEC Chair Gary Gensler, who has spearheaded the government’s crackdown on the crypto industry.
The Ripple ruling does not mean the crypto industry will win all its other cases. In the lawsuits filed against Coinbase and Binance, the SEC argued that many cryptocurrencies are securities. Judges will need to decide separately if the sale of these digital assets was illegal.
