Ripple Wins Case Against US SEC – XRP not a Security

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XRP, popularly known as the “banker’s coin,” is up over 90% today, following the news that Federal District Judge Analisa Torres of the Southern District of New York ruled against the United States Securities and Exchange Commission’s contention that XRP is a security.

According to her summary judgment, Ripple Labs, on 3 out of 4 issues, she maintains that in certain scenarios, the XRP token is not a security. She stated, “$XRP, as a digital token, is not in and of itself a ‘contract, transaction, or scheme’ that embodies the Howey requirements of an investment contract.”

The ruling comes nearly 3-years after the lawsuit was filed by the SEC against Ripple on Dec. 22, 2022. An amended complaint from the SEC was subsequently filed on February 18, 2021.

Interestingly, other tokens which had recently been delisted by major exchanges over concerns that they could be unregistered securities issuances also rallied.

The ruling

According to the order from the U.S. Court for the Southern District of New York, Ripple conducted “institutional sales” of XRP, selling approximately $728.9 million worth of XRP directly to institutional buyers, hedge funds, and other parties.

The court ruled that these sales constituted an unregistered offer and sale of investment contracts in violation of federal securities law. The investors who purchased XRP had the expectation of profiting from Ripple’s efforts in promoting and increasing the value of XRP.

The court granted the Securities and Exchange Commission’s (SEC) motion for summary judgment regarding institutional sales but denied it in other aspects.

It stated that the “programmatic sales” of XRP through exchanges and algorithms did not qualify as securities sales since the SEC could not definitively establish that speculative investors had a reasonable expectation of profits from the efforts of others.

The court highlighted the lack of evidence that less sophisticated programmatic buyers shared the same understandings and expectations as sophisticated investors.

The order also mentioned that the personal sales of XRP by Ripple’s executives, Chris Larsen and Brad Garlinghouse, along with other distributions, fell into the category of programmatic sales.

Ripple’s motion for summary judgment on programmatic sales, other distributions, and the executives’ sales was granted.

However, the court denied the SEC’s motion for summary judgment on an “aiding and abetting claim” against Larsen and Garlinghouse.

The court noted that it was not clear whether the executives knew or recklessly disregarded that securities laws, rather than laws under other regulatory regimes, applied to XRP.

In response to the order, Brad Garlinghouse tweeted his gratitude and confidence in Ripple’s position, stating that they have always been on the right side of the law and history.

He expressed thanks to everyone who supported them and referred to the decision as one that benefits crypto innovation in the U.S., hinting that there is more to come.


XRP’s sibling token Stellar XLM, also followed in Ripple’s footsteps, rallying more than 70% at the time of publishing to hit a near 9-month high at $0.19.

As a result of today’s ruling, a handful of analysts have suggested that the SEC’s loss against Ripple calls into question the viability of its other enforcement actions against crypto-focused companies.

Some have even suggested that today’s ruling will hamper the SEC’s multi-year resistance to approving a spot Bitcoin ETF.

Coinbase said Thursday that it will re-enable trading of XRP after a federal court ruled that some transactions on exchanges didn’t constitute the sale of securities.

  • The company said in a tweet, “Coinbase will re-enable trading for XRP (XRP) on the XRP network. Do not send this asset over other networks or your funds may be lost. Transfers for this asset remain available on @Coinbase & @CoinbaseExch in the regions where trading is supported.
  • “Trading is anticipated to begin later today, if liquidity conditions are met. Once sufficient supply of this asset is established trading on our XRP-USD, XRP-USDT and XRP-EUR trading pairs will launch in phases. Support for XRP may be restricted in some supported jurisdictions.”

Crypto exchange Gemini said earlier Thursday that it was exploring relisting XRP.

  • The firm said in a tweet, “Given today’s ruling that the sale of XRP on exchanges is not a security, @Gemini is exploring the listing of XRP for both spot and derivatives trading.”

All is Not Over

Despite the market’s positive reaction, some believe that the SEC saw only a partial defeat in this case.

This is because a spokesperson for the Securities and Exchange Commission left the door open for a possible appeal of the decision.

In a statement, an agency spokesperson said that the markets regulator will “continue to review the decision,” and touted other parts of the judge’s ruling that went in the agency’s favor.

  • The spokesperson said in a statement, “We are pleased that the court found that XRP tokens were offered and sold by Ripple as investment contracts in violation of the securities laws in certain circumstances. The court agreed with the SEC that the Howey test governs the securities analysis of crypto transactions and rejected Ripple’s made-up test as to what constitutes an investment contract, instead emphasizing that Howey and subsequent cases have held that a variety of tangible and intangible assets can serve as the subject of an investment contract.”

The spokesperson also noted that the federal judge in the case ruled that ignorance of securities law was not a sufficient defense. Independent experts expect an appeal from the SEC, if not both sides, as Torres found that over $700 million worth of XRP sales were unlawful and ordered a trial to determine personal liability for Ripple CEO Brad Garlinghouse and Executive Chairman Chris Larsen.

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