Ripple’s SEC Win – Five Things We Learnt

Reading Time: 3 minutes
  • Ripple won its case against the SEC yesterday, at least on the major points
  • The judge ruled that XRP is not a security, and selling it on exchanges doesn’t constitute a sale of securities
  • What are the key takeaways?

Unless you’ve been living under a rock, you’ll know that yesterday Ripple won its lawsuit against the Securities and Exchange Commission (SEC) regarding the alleged classification of XRP as a security. The news has elicited the biggest outpouring of emotions and thoughts in the crypto space since the collapse of FTX and has breathed new life into the sector. With so much news and insight doing the rounds, what were the five key takeaways? Let’s see.

XRP is Not a Security

The crucial takeaway is that XRP itself is not a security as the SEC had contended. Judge Analise Torres of the United States District Court for the Southern District of New York ruled that “XRP, as a digital token, is not in and of itself a “contract, transaction[,] or scheme” that embodies the Howey requirements of an investment contract,” which is what the entire case hinged on as far as the crypto space went.

The sale of XRP tokens by Ripple co-founders Brad Garlinghouse and Chris Larsen were also deemed to have not been securities transactions since they fell under the same umbrella, while payouts to employees using XRP were judged to be investment contracts because they did not involve an investment of money to begin with.

Institutional Sales of XRP Were Security Contracts

Ripple won on the crucial matter, but not all matters. Judge Torres ruled that the sale of XRP tokens to the public through third-party exchanges could not be considered a sale of securities, which was another key result that Ripple was hoping for, and which has seen exchanges like Coinbase immediately relist it.

The SEC did win, however, when it came to institutional sales of XRP tokens, which Judge Torres ruled did constitute a securities contract, stating that “The nature of the Institutional Sales also supports the conclusion that Ripple sold XRP as an investment rather than for consumptive use.” Ripple will face a fine over this element, but it won’t care.

Exchanges Are Back In

Having delisted XRP in the wake of the lawsuit, exchanges are relisting it without delay. Coinbase and Kraken have already relisted it, hoping to cash in on the potential rush of new buyers, while Binance never delisted it (in some jurisdictions).

These exchanges will almost certainly be followed by others in the coming days, with the decision potentially kicking off a short-term uptick in the crypto market.

SEC Ignores the Defeat

The SEC has failed to mention the verdict on its Twitter page and completely ignored the defeat on the crucial point in a statement:

The agency said it was “pleased that the court found that XRP tokens were offered and sold by Ripple as investment contracts in violation of the securities laws in certain circumstances,” before stating that the court had agreed with its contention that “the Howey test governs the securities analysis of crypto transactions and rejected Ripple’s made-up test as to what constitutes an investment contract.” What it didn’t mention was that its precious Howey test had been used to rule that, outside of institutional purchases, XRP wasn’t a security.

The SEC added that it would “continue to review the decision,” with an appeal likely.

The News Won’t Have Pleased Everyone

Obviously, the news didn’t please everyone, with a few people in the cryptosphere gnashing their teeth over the decision or simply (like the SEC) pretending it didn’t happen. Aaron Kaplan, CEO of the much-criticized platform Prometheum, has been effusive over his backing of the SEC’s contention that all cryptocurrencies are securities, so he’s probably feeling a little sheepish today.

BSV’s financial backer Calvin Ayre is another one who looks like an absolute mug today, given that he has been banging on for months about BSV being the only coin not a security, and only because it’s the real Bitcoin. Ayre has claimed on Twitter since the lawsuit was filed that he “can not see how XRP can win against the SEC,” that “XRP is clearly a security so they are fucked…that is my personal prediction,” that “XRP is an illegal security,” and that “XRP is an illegal security in US…think rolling illegal ICO.”

The only comment Ayre has made on the subject since the ruling is to criticize Coinbase for relisting XRP, which he said the exchange did because it is a “scam.”


Aah, bless.