Ripple Prevails in SEC Lawsuit, Implications Reach Beyond Company to Entire US Crypto Industry

July 20, 2023 - In a landmark decision for both Ripple and the broader cryptocurrency industry in the United States, a recent court judgement has declared that XRP, Ripple's cryptographic token, is not a security under law.

The lawsuit, initiated by the Securities and Exchange Commission (SEC) against Ripple, its CEO, and its Chairman, has been widely viewed as an attempted regulation through prosecution. However, Ripple consistently asserted that the lawsuit lacked merit.

The case hinged on whether XRP could be classified as an investment contract, and therefore a security, according to the law. Last week's ruling confirmed that XRP is not, in itself, a security, thereby challenging the SEC's argument that crypto tokens are securities.

Brad Garlinghouse, CEO of Ripple, remarked, “This decision is not only historic for Ripple, but for cryptocurrencies at large. We have always maintained that we would be on the right side of the law and history. This ruling marks an important milestone in the regulatory-by-enforcement approach by the agency. It also signals a potential turning point for Congress to establish clear rules for cryptocurrencies in the USA.”

The court also clarified that Ripple's XRP sales on exchanges, Ripple executives' XRP sales, and Ripple's distributions of XRP to developers, charities, and employees are not securities.

Stu Alderoty, Chief Legal Officer of Ripple, commented on the significance of the judgement, saying, “The court has differentiated between the token itself and how it was sold. This ruling will have major implications for the classification of digital tokens in the US going forward. The SEC can no longer rely on its track record on cryptocurrencies — which until now has primarily involved settlements with parties who lacked the resources or determination to fight back.”

The court will now focus on certain contractual sales to institutional investors, while other issues have been resolved legally. Ripple, in the meantime, will continue to pursue robust cryptocurrency regulation in the US and invest in jurisdictions with clear regulatory frameworks.

Recently, Ripple was granted an Approval in Principle for a major payment institution license by the Monetary Authority of Singapore. Regulators in several other countries, including Japan, Switzerland, the United Arab Emirates, and the United Kingdom, had previously ruled that XRP is not a security.