Ripple Labs’ split-decision victory against the United States securities regulator is seen as a significant blow to the regulator’s “war on crypto,” however, crypto lawyers warn it isn’t a definitive victory for the industry.
In a landmark ruling on July 13, U.S. district court Judge Analisa Torres determined that XRP (XRP) is not a security — at least when sold to the general public.
The decision was met with a joyous uproar from XRP tokenholders and came with a massive surge in the token’s price, with industry heavyweights lauding the decision as likely to aid crypto exchanges Coinbase and Binance in their respective lawsuits.
Luke Martin, the founder of crypto investment firm Venture Coinist, noted that the “core component” of the U.S. Securities and Exchange Commission’s (SEC) claim in its suits against Binance and Coinbase is that they offered the sale of unregistered securities on their platforms.
After losing on this matter in the case of XRP, Martin believes this will be a substantial blow to the SEC and its Chair, Gary Gensler.
He called the decision “inconceivably bullish” for the industry:
This Ripple news is larger than XRP…
Remember when the SEC went on an all-out attack versus crypto a few months ago?
•Suing Binance for breaking securities rules
•Suing Coinbase for breaking securities rules
•Targeting 10-15 large altcoins as securitiesClassifying tokens…
— Luke Martin (@VentureCoinist) July 13, 2023
Pro-XRP lawyer John Deaton shared similar sentiments, stating that Coinbase was the other “winner” from the ruling and that altcoins would stand to benefit.
Similarly, Tyler Winklevoss, the CEO of cryptocurrency exchange Gemini, said the ruling “decimates” the SEC’s case against Coinbase. His twin brother, Cameron Winklevoss, referred to the ruling as a “watershed moment” that will make it difficult for the SEC to claim authority over cryptocurrencies.
The Ripple ruling today decimates the @SECGov‘s case against @coinbase. Have fun with that one @GaryGensler. https://t.co/2lfFXxX2Xf
— Tyler Winklevoss (@tyler) July 13, 2023
Coinbase, Kraken and iTrustShares have already relisted XRP on their respective platforms following the decision.
Words of caution
Despite the positive outcome for XRP, several digital asset lawyers warned against celebrating too soon.
Law firm partner Stephen Palley of Brown Rudnick noted that the summary judgment is only partial and that the ruling by Torres does not set a precedent. Instead, it may only serve as persuasive commentary for future courts to follow if they so choose.
A word of caution: that order in the Ripple case is a partial summary judgment from a single district court judge.
While persuasive, it’s not binding precedent on other courts and will likely be appealed and could be reversed
don’t yolo into anything based on that decision
— Palley (@stephendpalley) July 13, 2023
Palley and others noted that there’s also the chance the SEC may appeal the decision, which presents the possibility that a higher court overturns the rulings made by Torres.
However, Paradigm policy director and former SEC adviser Justin Slaughter said that “the odds are even if they win at the appellate level, they’ll lose at the Supreme Court” because it “has been very hostile to a bunch of agencies recently, on a host of issues from the APA to how staffing at agencies works. I don’t expect them to miss a chance to cite a Democratic judge to thwack a major agency.“
Related: Bad news for Ripple? LBRY judge passes ruling on if secondary crypto sales are securities
Ripple will also need to deal with the SEC’s claim that its CEO Brad Garlinghouse and co-founder Chris Larsen “aided and abetted” the institutional sale of XRP, says U.S. lawyer James “MetaLawMan” Murphy.
Based on my quick read through, it looks like the only thing left for trial would be the claim that Larsen and Garlinghouse “aided and abetted” Ripple’s Institutional Sales of XRP–which were the only sales the court found to violate the law. https://t.co/mi7i4Diy9j
— MetaLawMan (@MetaLawMan) July 13, 2023
The SEC alleged $728 million worth of XRP was sold from institutional sales.
U.S.-based commercial litigator Joe Carlasare ripped Garlinghouse on this point, asserting that Ripple “made $700 million in unlawful profit.”
No, the most important part of the ruling is the Court found that your company broke the law and made illegal institutional sales.
Your company made $700 million in unlawful profit. Good luck at trial claiming ignorance of Howey https://t.co/qSWEt34yFD
— Joe Carlasare (@JoeCarlasare) July 13, 2023
This claim was set aside by Torres and will likely be contested at trial.
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