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Landmark Ruling: Ripple Rides the Waves of Victory as XRP Escapes Securities Classification

In a groundbreaking legal victory for Ripple Labs Inc, a U.S. judge ruled on Thursday that the company did not violate federal securities law by selling its XRP token on public exchanges. The decision sparked a surge in the value of XRP, which soared by 25% following the ruling, as reported by Refinitiv Eikon data.

While the ruling delivered a resounding win for Ripple Labs and the cryptocurrency industry as a whole, it also marked a partial victory for the U.S. Securities and Exchange Commission (SEC). The regulatory body has been pursuing numerous cases against crypto developers, with Ripple Labs being the largest case to be decided by a judge. U.S. District Judge Analisa Torres declared that Ripple violated federal securities law by directly selling the cryptocurrency XRP to sophisticated investors. However, the ruling also signaled the first time a U.S. judge acknowledged certain digital asset sales as falling outside the purview of U.S. securities law.

It's worth noting that the ruling is subject to possible appeal. As of now, there has been no immediate comment from Ripple's attorney or an SEC spokesperson regarding the ruling.

The SEC's accusations revolved around Ripple and its current and former chief executives' alleged involvement in a $1.3 billion unregistered securities offering through the sale of XRP, which was created by Ripple's founders in 2012. Judge Torres stated that the $728.9 million in XRP sales to hedge funds and sophisticated buyers constituted unregistered securities sales. However, she ruled that Ripple's XRP sales on public cryptocurrency exchanges were not considered offers of securities under the law. This distinction was made because purchasers did not have a reasonable expectation of profit tied to Ripple's efforts.

Judge Torres described these sales as "blind bid/ask transactions" where buyers were unaware whether their payments went to Ripple or another seller of XRP. Furthermore, she ruled that XRP sales on cryptocurrency platforms by Ripple CEO Brad Garlinghouse, co-founder and former CEO Chris Larsen, and other distributions, including employee compensation, did not involve securities. Nevertheless, Torres stated that a jury must determine whether Garlinghouse and Larsen aided the company's violation of the law.

Garlinghouse expressed his joy over the ruling in a tweet, thanking everyone who contributed to the decision and highlighting its significance for crypto innovation in the United States. Larsen's attorney did not provide immediate comment on the ruling.

The ruling is expected to have a positive impact on Coinbase, the largest U.S. crypto exchange, which is currently fighting its own SEC case, according to Gary DeWaal, an attorney at Katten Muchin Rosenman. The market reaction to the ruling underscores its immense significance for the industry.

Moreover, the ruling has reignited the call for Congress to enact legislation that clarifies the legal status of digital assets. Representative Tom Emmer, a Republican and the House of Representatives Majority Whip, took to Twitter to assert that the ruling established the distinction between a token and an investment contract.

With Ripple Labs emerging victorious in the United States District Court, the ruling signifies a significant milestone in the ongoing battle between the SEC and the crypto industry. Judge Analisa Torres' decision firmly establishes that the XRP token is not a security, eliciting jubilation and optimism within the crypto community. The ripple effect of this landmark ruling is likely to reverberate throughout the industry, fueling further innovation and reshaping the regulatory landscape.


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