Ripple didn’t offer securities, although it’s not completely innocent
In its protracted clash with the United States Securities and Exchange Commission (SEC), Ripple and its XRP cryptocurrency emerged triumphant from a single skirmish. But this fleeting conquest does not signal the end of the arduous conflict it faces.
A judicial decision yesterday ruled that the trade of Ripple Labs Inc’s coveted XRP token on a public marketplace did not breach the boundaries of legality and was not a securities offering. Interestingly, the court also decreed that Ripple’s dealings with hedge funds are an example of an illegal sale of securities.
Ripple and its team members face allegations by the SEC of funneling $1.3 billion in unregistered securities by means of selling XRP. Judge Analisa Torres from the US District Court has issued a verdict affirming that the company’s transaction involving $728.9 million worth of XRP trades, executed over an 11-year span exclusively for hedge funds, violated the law as it failed to complete the necessary registration process for securities.
Yet, Judge Torres clarified that the act of selling XRP on public exchanges does not constitute a security offer as per legal statutes. This is because consumers lack a justifiable anticipation of profit derived from Ripple’s initiatives. In addition, the direct sale of XRP on crypto trading platforms by CEO Brad Garlinghouse and former CEO Chris Larsen was not illegal. This is also extended to any compensation in XRP Ripple gave to employees.
Because the SEC’s assertion that Ripple offered unregistered securities was partially upheld, the battle isn’t over. However, the ruling is a significant victory that could have wider implications for the entire crypto industry.
