Ripple 'Ripples' the market: Landmark legal win sends XRP soaring

In a significant legal victory for Ripple Labs Inc, a U.S. judge ruled that the company did not violate federal securities law by selling its XRP token on public exchanges, Reuters reported. The ruling by U.S. District Judge Analisa Torres marked the first win for a cryptocurrency company in a case brought by the U.S. Securities and Exchange Commission (SEC). However, the SEC did secure a partial victory as well.

Following the announcement of the ruling, XRP experienced a surge in value, increasing by 75 per cent, according to Refinitiv Eikon data. The decision is specific to the facts of the case but is expected to provide ammunition for other crypto firms involved in similar battles with the SEC regarding the jurisdiction of their products.

Case details

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The SEC accused Ripple and its current and former chief executives of conducting an unregistered securities offering worth $1.3 billion by selling XRP, which was created in 2012. The cryptocurrency industry has closely watched the case, which disputes the SEC's claim that most crypto tokens are securities subject to strict investor protection rules.

Judge Torres ruled that Ripple's sales of XRP on public cryptocurrency exchanges did not qualify as offers of securities under the law, as purchasers did not have a reasonable expectation of profit tied to Ripple's efforts. She referred to the sales as 'blind bid/ask transactions,' where buyers were unaware if their payments went to Ripple or other sellers of XRP.

Unregistered sales of securities

However, the judge also found that Ripple's sales of XRP to hedge funds and other sophisticated buyers, amounting to $728.9 million, constituted unregistered sales of securities. She stated that Ripple's marketing targeted institutional investors, promoting a speculative value proposition for XRP that relied on the company's efforts to develop the underlying blockchain infrastructure.

While the ruling is seen as a major victory for Ripple, the case involving Garlinghouse and Larsen aiding the company's violation of the law will proceed to trial. The defendants cannot argue at trial that they lacked 'fair notice' regarding XRP's classification as a cryptocurrency.

Surging crypto value since verdict

Coinbase, the largest U.S. cryptocurrency exchange, announced that it would resume trading of XRP on its platform in response to the court ruling. Coinbase's stock surged by 24 per cent and closed at $107 per share following the news on Thursday.

The ruling has prompted calls from the crypto industry for Congress to clarify the status of digital assets and establish clear rules for tokens. The outcome of the Ripple case has given optimism to market participants, boosting the shares of various cryptocurrency and blockchain-related companies such as Riot Platforms, Marathon Digital Holdings, Microstrategy, and Hut 8 Mining.

In the aftermath of the ruling, Bitcoin, the largest cryptocurrency, rose by 4.1 per cent to $31,584, while Ethereum, the second-largest cryptocurrency, increased by 6.43 per cent to $1,993.3.

(With Inputs from Reuters)