TL;DR
Altcoins pumped hard on the news that the SEC essentially lost its case against Ripple, the company behind XRP. The SEC can appeal and probably will, but the verdict from the New York Court is considered thorough and shifts the balance of power in the tug-of-war in favor of the US crypto industry. It is the boost of confidence that the industry needed and it proves that sticking to its guns pays off: the SEC will be held accountable by the courts if it sues without proper legal foundation. The verdict also marks a clear call for regulatory clarity, which will have to come from Congress. That too will be good for crypto in the US.
Ripple’s victory is considered a big deal and not just in the crypto community. Traditional media agree that last week’s ruling in favor of Ripple Labs and against the financial watchdog SEC is big. ‘A key legal victory’ says a CNN headline. ‘A landmark win’ says Reuters. Crypto Twitter is not just victorious but vindictive: ‘FY Gensler’. It is indeed a big win for Ripple, American crypto exchanges, and altcoins in general.
A key part of the ruling of the New York District Court’s Judge was that crypto exchanges that allowed trading of Ripple’s token XRP were NOT engaging in listing an unregistered security. Selling a security comes with strict requirements: disclosure requirements and all kinds of compliance that most crypto projects don’t adhere to. The securities laws, from the 1930s don’t seem to be fit for this new asset class.
Why is this News Big?
First of all, if Ripple’s XRP is not considered a security then it’s hard to imagine which altcoin will. After all, Ripple is one of the most company-like, and least decentralized crypto projects.
As Paul Grewal pointed out in an interview:
“Particularly the portion [of the verdict] dealing with trading on exchanges: look for all the references to XRP and just swap out the letters XRP and swap in MATIC, Cardano – I mean you could pick any number of assets including those that are at issue in our [Coinbases’] case. The logic holds. There’s nothing different about the tokens that would change any of the Judge’s analysis. That’s why this thing is such a blockbuster.”
So, US crypto investors no longer have to feel like they are potentially doing something against securities laws.
“For exchanges, for tokens that are listed on exchanges, for regular investors, this ruling strikes a blow to the idea that somehow securities are being traded when people go onto exchanges and trade the assets,” Paul Grewal, chief legal officer at Coinbase, said on CNBC.
What does this mean in practice? A few weeks ago, Robinhood delisted coins ADA, SOL and MATIC. XRP was already long ago delisted by American exchanges such as Coinbase and Kraken. After the verdict, these exchanges relisted XRP. And the current ruling makes it of course likely that Robinhood will make a similar move with respect to mentioned alts.
Background of the Case
In December 2020, the American Securities and Exchange Commission (SEC) started legal action against Ripple Labs. The heart of the matter was whether XRP is a so-called security or not. If so, then Ripple would have breached the securities laws. Issuing a security comes with all kinds of regulatory requirements.
The American SEC uses the…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
