In a highly anticipated ruling on July 13, 2023, Judge Analisa Torres of the United States District Court for the Southern District of New York delivered her decision in the SEC vs Ripple Labs lawsuit, a case that originated in December 2020.
Judge Torres’ ruling introduced a mixed outcome, with different implications for Ripple’s sale of XRP to the general public and the distribution of the token. The judge determined that these transactions do not qualify as offering investment contracts.
This conclusion applies to two categories: “Programmatic sales,” which involved the sale of XRP to the public, and “Other Distributions,” where XRP was distributed free of charge.
The judge explicitly noted, “In any event, the SEC does not develop the argument that these secondary market sales were offers or sales of investment contracts, particularly where the payment of money for these XRP sales never traced back to Ripple, and the Court cannot make such a finding.”
However, the ruling remains nuanced, as a Twitter user highlighted. The user wrote, “No, the court ruled that a jury must decide whether the other sales were unregistered sales of securities because there are disputed issues of fact. The court found, as a matter of law (i.e., not subject to reasonable dispute) that Ripple’s institutional sales were securities.”
According to the judge’s ruling, Ripple’s sale of XRP violated securities regulations by offering and selling investment contracts without proper registration. As a result, the case will proceed to trial, and a separate order will determine the trial date and pre-trial deadlines.
The court’s decision stated, “For the foregoing reasons, the SEC’s motion for summary judgment is granted as to the Institutional Sales, and otherwise denied. Defendants’ motion for summary judgment is granted as to the Programmatic Sales, the Other Distributions, and Larsen’s and Garlinghouse’s sales, and denied as to the Institutional Sales.”
The ruling brings both relief and anticipation, as Ripple’s institutional sales have been categorized as securities while the status of other sales remains unresolved. The upcoming trial will offer further clarity on the matter and potentially have significant implications for the future of Ripple and the broader cryptocurrency industry.
