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Federal court rules Ripple’s XRP token can be treated as a security…sometimes

The saga of Ripple Labs, the XRP token, and whether the sale of its crypto token constituted a securities law violation in the U.S. advanced today. In a ruling from the U.S. District Court of the Southern District of New York, Judge Analisa Torres gave a nuanced view on the matter.

In summary, after examining several different sales methods of the XRP token over time, and applying the Howey Test to each, the district judge approved the SEC’s motion for summary judgment in regards to the institutional sale by Ripple of the XRP token. This means XRP is a security when it’s in institutional sales, according to Torres.

But, in an interesting twist, the judge then denied the SEC’s request for summary judgment as it related to programmatic sales of XRP among other circumstances, including sales by two of the company’s former and current leaders. This means she ruled XRP as not a security toward the broader public.

Basically, the verdict is a double-edged sword, but most of the crypto community is viewing it in a positive light – probably because they are mostly retail investors invested in the non-security side of the ruling.

For context, the SEC case against Ripple has been in motion since December 2020, when the agency sued the company and its two executives Brad Garlinghouse and Chris Larsen for raising $1.3 billion in an alleged “unregistered, ongoing digital asset securities offering.”

The latest SDNY ruling comes as the SEC is ramping up enforcement actions against entities that it considers afoul of securities law in the United States, filing suits against international players in the crypto market including Binance, and domestic competitors including Coinbase. The ruling in the XRP suit makes it clear that more perspectives than just the SEC’s see illegal securities activity in crypto-land, even if less broadly than what the regulator itself considers over the present legal lines.

In the wake of the mixed ruling, the value of the XRP token is sharply higher, rising 28% from about 47 cents to 60 cents at the time of reporting. The last time that the token was worth so much was May 2022.

Why is the value of XRP rising when it did not achieve a complete legal reprieve? The legal risk of today’s ruling for XRP and Ripple Labs broke securities law regarding institutional sales of XRP may be less than some investors feared, or perhaps an even partial win for the XRP world was better than anticipated. Either way, for holders of XRP, the judge’s decision is driving profits.

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