Tuesday, June 18, 2024

US Judge Determines XRP Not Inherently a Security, Prompting XRP Supporters’ Joy

A recent ruling by Judge Analisa Torres in the United States has declared that the cryptocurrency XRP is not necessarily classified as a security on its face. The judge’s decision partially granted and partially denied the motions for summary judgment from both the US Securities and Exchange Commission (SEC) and Ripple Labs. According to the order, the court cannot definitively label XRP as a security in terms of “programmatic sales,” but the situation differs for institutional sales.

Uncertainty Persists: Judge Grants Partial Summary Judgment in XRP Security Case

The judge overseeing the SEC’s legal action against Ripple Labs and executives Chris Larsen and Brad Garlinghouse has stated that XRP cannot be categorized as a security.

The order clarifies that while the language of the Howey test is explicit, it does not automatically deem XRP a security. The judge also granted and denied certain aspects of the summary judgments filed by the SEC and Ripple Labs.

Consequently, the order from Judge Torres notes, “As a result, the SEC’s motion for summary judgment on the aiding and abetting claim against Larsen and Garlinghouse is denied.” The order affirms that the court cannot conclude that XRP is a security as a matter of law and highlights the existence of genuine disputes regarding whether XRP qualifies as a security.

The court additionally acknowledges that the Howey test must be applied within the specific context of XRP transactions and that the involved parties have presented conflicting evidence regarding the relevant factors. The judge recognizes the distinction between programmatic sales and institutional sales. Notably, the ruling emphasizes that while institutional sales could potentially be considered security transactions, programmatic sales and distributions to employees do not fall under this classification.

“Ripple’s Programmatic Sales represented less than 1% of the global XRP trading volume since 2017,” the order states. “Consequently, the majority of individuals who purchased XRP from digital asset exchanges did not invest in Ripple at all. An Institutional Buyer knowingly purchased XRP directly from Ripple pursuant to a contract, but the economic reality is that a Programmatic Buyer stood in the same shoes as a secondary market purchaser who did not know to whom or what it was paying its money.”

The court’s order further explains:

Therefore, after considering the economic reality and totality of circumstances, the court concludes that Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts.

Following the judge’s ruling, supporters of XRP expressed their delight, resulting in a nearly 30% surge in XRP’s value against the US dollar. While Judge Torres’s decision was met with celebration, the court’s ruling on the cross-motions for summary judgment indicates the presence of genuine disputes regarding whether XRP is a security.

The court plans to issue a separate order in the future to establish a trial date and related pre-trial deadlines. As XRP enthusiasts rejoice, this case is expected to continue.

What is your perspective on the judge’s ruling concerning XRP’s security classification? Feel free to share your thoughts and opinions on this matter in the comments section below.

Frequently Asked Questions (FAQs) about XRP security ruling

What was the recent ruling by the US judge regarding XRP’s security classification?

According to the recent ruling by US judge Analisa Torres, XRP is not necessarily classified as a security on its face. The judge granted partial summary judgment to both the US Securities and Exchange Commission (SEC) and Ripple Labs, stating that XRP cannot be deemed a security under the law in terms of “programmatic sales.” However, the ruling indicated that institutional sales could be considered security transactions.

What is the significance of the judge’s ruling on XRP’s security classification?

The judge’s ruling brings about significant implications for the classification of XRP as a security. It clarifies that XRP is not inherently considered a security based on its nature, particularly in the context of programmatic sales. However, the ruling suggests that institutional sales may fall under the security classification. This ruling has led to celebrations among XRP supporters and had a positive impact on XRP’s market value.

Is the classification of XRP as a security fully resolved with this ruling?

No, the classification of XRP as a security is not fully resolved with this ruling. While the judge granted partial summary judgment, it was noted that there are genuine disputes of material fact regarding whether XRP qualifies as a security. The court emphasized the need to consider the specific context of XRP transactions and conflicting evidence presented by the involved parties. The case is expected to continue, and a trial date will be set in the future.

What is the next step in the legal process following the judge’s ruling?

Following the ruling, the court announced that it will issue a separate order at a later date to determine a trial date and related pre-trial deadlines. This indicates that the case will proceed further to determine a final resolution on the classification of XRP as a security. Until then, uncertainty remains regarding the ultimate outcome of the case and its impact on XRP and Ripple Labs.

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