A recent report which critically analyzed the recent XRP ruling stated that Ripple might be victorious, but the SEC would not back down easily. The report hinted that the United States Securities and Exchange Commission may appeal the judgment on the case sooner or later.
The Ripple community was jubilant alongside the whole crypto community when Judge Analisa Torres ruled that the XRP token issued by Ripple Labs is not a token. This is because the ruling against the SEC was a huge development and a very vital milestone for the crypto industry in the United States, as per the report.
In addition, the report elaborately analyzed the ruling stating that Judge Torres decided that Ripple did not trespass any securities regulations of the US because it was selling out its XRP tokens to digital exchange customers anonymously.
This ruling has reportedly created a huge barrier for the US SEC which had aimed at using enforcement actions and piecemeal actions to regulate the crypto industry. In addition, the SEC might not be able to come after other exchanges in similar conditions as Ripple after the ruling went against them.
While the ruling is a positive and big development for XRP users as it means they get to spend and hold the token without any regulatory-relatedly fear, it however, doesn’t make other coins free from the reach of the regulators, according to the report.
Analysis Of Judge Torres’s Ruling
In the analytic report, Judge Torres supposedly used a double-standard review to assess whether Ripple Labs sold XRP as unregistered securities or not. First, she reviewed how the exchange presented XRP sales to sophisticated institutional players. Second, she studied how the firm presented the sale to everyday retail investors.
In her review, she reportedly understood that Ripple indeed sold XRP to sophisticated hedge funds as a security but did not market the tokens to retail investors the same way.
She reportedly identified the difference as between 2011 and 2022, Ripple or any of its representatives did not contact or have any legal agreement with everyday investors that bought the token or traded on its platform. Hence, she pointed out that most of the buyers would never have found out if their purchase of XRP was any normal procedure of a typical crypto exchange.
Meanwhile, during the same period, she noticed that institutional investors that bought XRP from Ripple depended on the token as the exchange handed out contracts, executive talks, marketing materials, and other forms of communications to educate the buyers on how Ripple would create value for XRP.
Due to this marketing strategy, the judge reportedly pointed out that industrial investors would have gathered from Ripple’s actions that the firm was pitching a speculative value project which exclusively depended on Ripple Labs’ success.
The SEC Could Appeal The Case Later
She added that there is nothing wrong with Ripple’s approach as the SEC stated an identical strategy in 2018 when it presented an official framework for Investment Contract Analysis of Virtual Assets. Instead, the Judge remarked that the SEC should have warned public exchanges that they could still be sanctioned depending on how they presented their tokens to different customers for sale.
Furthermore, she highlighted that Ripple was lucky enough that the SEC gave several options for start-ups to check if their operations align with the securities laws of the US. She said with this, Ripple was able to model its sale contracts like investment contracts by integrating resale limitations, statement of purpose, lock-up offers, and indemnification terms.
In addition, the market report and brochures Ripple gave potential investors clearly stated that the performance of XRP tokens is largely dependent on Ripple’s success. Worse, the Ripple executives reportedly marketed investment in XRP on Reddit and Youtube.
As it stands, the Securities and exchanges commission could possibly appeal to the Second Circuit to redress the ruling of Judge Analisa Torres. Even though the ruling did not give exactly what the crypto community expected, it at least gave a beam of hope on the reality of getting crypto regulatory clarity in the US.
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