On Thursday, a federal judge ruled that the sale of a digital asset called XRP on public exchanges complies with securities laws, giving the cryptocurrency industry an early victory in its legal battle with U.S. regulators. I got it.
The Securities and Exchange Commission has long argued that digital assets constitute securities in the same way as stocks and bonds traded on Wall Street and should be subject to the same strict regulations. Last month, the SEC charged two of the largest cryptocurrency exchanges, Coinbase and Binance, with selling unregistered securities to the public.
But Thursday's ruling in a case involving cryptocurrency company Ripple complicates that debate and could give the industry more ammunition to defend itself in court.
In December 2020, the SEC charged Ripple with violating securities laws in one of the first major legal battles involving cryptocurrencies. In a 34-page ruling Thursday, Judge Annalisa Torres of the U.S. District Court for the Southern District of New York ruled that Ripple was violating the law if the cryptocurrency XRP created by Ripple was sold on public exchanges. He said no.
The ruling was not a complete victory for the industry. Torres also found that Ripple violated securities laws when it sold XRP to sophisticated hedge funds and other institutional investors.
An SEC spokesperson said in a statement that the agency is reviewing the decision. “We are pleased that the court found that Ripple offered and sold XRP tokens as investment contracts in violation of securities laws under certain circumstances,” it said in a statement.
In an interview, Ripple's chief legal officer, Stuart Alderoti, called the ruling “a victory for the broader crypto industry.”
“Today's decision provides appropriate checks and balances on the SEC's efforts to enforce enforcement regulations,” Alderoti said.
Ripple was founded in 2012 by a group of developers including Chris Larsen, who has long been ranked among the world's richest crypto executives. The company's mission was to simplify international payments using the XRP token.
Over the years, the token has become one of the most valuable cryptocurrencies on the market, and Ripple has gained a loyal following online. However, the SEC lawsuit cast a cloud over the company, and some exchanges stopped selling XRP.
The resolution of the case was widely anticipated in the crypto industry, with prominent executives celebrating Torres' ruling as a significant victory.
“Most of the time, I love being a lawyer,” said Paul Grewal, chief legal officer at Coinbase. wrote on Twitter. “Today is one of those days.”
Tyler Winklevoss, one of the founders of Gemini Exchange, tweeted“Adios Gary” is a term used to refer to SEC Chairman Gary Gensler, who has led the government's crackdown on the cryptocurrency industry.
However, the Ripple ruling does not mean the crypto industry will win other lawsuits. In its lawsuit against Binance and Coinbase, the SEC argued that a wide range of cryptocurrencies constitute securities. Judges in these cases will have to make individual decisions about whether the sale of digital assets violated the law.
