In a recent and highly anticipated decision, a court in the Southern District of New York held that Ripple’s cryptocurrency token – XRP – is not inherently a security. In a setback to the SEC, the court also held that certain sales of XRP to retail investors through blind “bid/ask” transactions were not securities transactions when considering the economic realities and under the totality of the circumstances. SEC v. Ripple Labs, Inc., et al.
The court delivered its decision on these “programmatic sales” of XRP to retail investors, as well as its decisions on “institutional” and other types of sales of XRP, when ruling on competing summary judgment motions. Even though the court’s rulings were limited to the transactions at issue and could be appealed, its decision undermines the SEC’s current position that it requires no additional authority from Congress to regulate both sales of tokens and cryptocurrency trading platforms.