In a landmark ruling, the U.S. Securities and Exchange Commission (SEC) has dismissed its lawsuit against Ripple, the company behind the XRP cryptocurrency, and declared that XRP is not a security asset. This means that XRP can continue to operate as a digital currency without being subject to the same regulations and restrictions as securities, such as stocks and bonds.
The SEC had accused Ripple of selling unregistered securities worth $1.3 billion through its XRP token sales since 2013. Ripple argued that XRP was a medium of exchange and a utility token, not an investment contract that gave investors a stake in the company. The case hinged on whether XRP met the criteria of the Howey Test, a legal framework that determines whether an asset is a security or not.
The court sided with Ripple, finding that XRP did not meet the Howey Test because:
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XRP holders did not have a common enterprise with Ripple, as they did not share in the profits or losses of the company.
XRP holders did not have a reasonable expectation of profits based on Ripple’s efforts, as they could use XRP for various purposes, such as cross-border payments, remittances, and trading.
XRP holders did not rely on Ripple’s managerial or entrepreneurial skills, as they could transact with XRP independently of Ripple’s involvement.
The judge also noted that the SEC had failed to provide clear and consistent guidance on how to classify digital assets, and had acted arbitrarily and capriciously in pursuing its case against Ripple. She said that the SEC had violated the due process rights of Ripple and its investors and had caused irreparable harm to the XRP ecosystem.
The court also noted that XRP had a clear use case and value proposition as a global payment system that was faster, cheaper, and more scalable than traditional methods. The court recognized that XRP had a legitimate role in the innovation and development of the blockchain and crypto industry.
The ruling is a major victory for Ripple and the XRP community, as it clears the legal uncertainty and regulatory hurdles that have plagued the project for years. It also sets a precedent for other crypto projects that may face similar challenges from the SEC in the future.
The market reacted positively to the news, as XRP surged by over 50% in the hours following the announcement. According to CoinMarketCap, XRP reached a high of $1.87 on July 13, 2023, its highest level since May 2021. The market capitalization of XRP also increased by more than $50 billion, making it the fourth-largest cryptocurrency by market cap. Many analysts and experts predict that XRP will continue to grow and reach new highs in the coming months.
Ripple CEO Brad Garlinghouse expressed his gratitude and relief in a tweet, saying:
Today is a great day for crypto and the future of the internet. We are grateful to the court for recognizing the innovation and potential of XRP and for dismissing the SEC’s baseless claims. We look forward to continuing our mission of creating an open and inclusive financial system for everyone.
Garlinghouse also thanked the XRP community for their loyalty and support throughout the legal battle, and said that Ripple would continue to work with regulators and policymakers to foster innovation and adoption of digital assets.
Ripple also announced that it will resume its operations in the U.S. and expand its partnerships with banks, payment providers, and other institutions that want to leverage its technology and network. Ripple said that it will continue to work with regulators and policymakers to ensure that crypto is adopted in a responsible and compliant manner.
Ripple XRP has proven itself to be a resilient and valuable asset that can overcome any challenge. It has also shown that it is not a security asset, but a currency that can benefit millions of people around the world. The future is bright for Ripple XRP and its supporters.