A battle won, but a war far from over? The courts have finally ruled in the lawsuit between Ripple and the US regulator. The token XRP is not a security (a share) in the eyes of the law. In fact, the SEC (Securities Exchange Commission) has no authority to impose its demands on crypto companies. Yet this is what it has been trying to do relentlessly since the beginning of 2023. Here’s a look back at the consequences of a trial that could last for years yet.
SEC: an appeal is not imminent
Last week undoubtedly marked a turning point in the struggle of the crypto ecosystem against the US financial regulator. In Gary Gensler’s case against the SEC, the decision of the Judge Analisa Torres leaned in favor of Rippleissuer of the XRP token. When a token is sold via an exchange, the courts consider that the sale does not meet the criteria of the Howey test, so that the token is simply not a financial security (security in English). In fact, the SEC has no authority.
If this is valid for XRP, then this is also justified for any other token. A liberating decision for an entire ecosystem that could find more room for maneuver and freedom to innovate. Indeed, this lawsuit now sets a precedent that these crypto companies will be able to rely on in the event of a future lawsuit. Brad GarlinghouseCEO of Ripple, declares that if the SEC decided to appeal the decision, it would only further support Judge Torres in his decision.
For him, it could be years before the SEC finds the opportunity to appeal:
« As a matter of law, the law of the land today is such that XRP is not a security. Until there’s an opportunity for the SEC to file an appeal, which could take years, frankly, we’re really optimistic. »
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USA back in the crypto race?
Despite everything, Ripple isn’t all white either. Visit XRP tokens sold OTC (over the counter)i.e. directly to institutional clients, have been classified as securities. Brad Garlinghouse dismisses the impact of this part of the verdict out of hand. For him, it’s merely anecdotal in the face of the magnitude of the overall decision.
But it could be important in the future. Indeed, from now on sale of brand new tokens could run directly via exchanges and outside institutional circuits, in order to avoid qualification as a security of the latter. So, are we moving towards easier access to investment in new projects at better prices for private individuals? We’ll see in the next few years.
« I hope that the decision (…) [de justice] will be the wake-up call Congress needs. This decision extinguishes the SEC’s claims that almost all tokens are securities. [Cela] Should set a positive precedent for all other digital assets in the U.S. »
For Brad Garlinghouse, this court ruling should give more freedom to companies in the crypto sector to pursue their innovation activities, and to do so without the weight of the SEC’s gaze on their shoulder and the associated threats of sanctions. It’s enough to dampen the spirits of Gary Gensler, who is quick to accuse these crypto companies of everything. Perhaps it’s also a way of re-launching USA in the race for web 3 innovation.
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