A federal judge ruled Thursday that cryptocurrency Ripple’s token is “not necessarily a security on its face,” a major development for the digital asset and other cryptocurrencies.
The ruling stems from a 2020 lawsuit from the Securities and Exchange Commission, which alleged that Ripple violated the law by selling the token without registering with the agency. Despite the win being just a partial victory because the judge ruled other sales of the token did violate securities law, the coin and other cryptocurrencies soared in response.
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Ripple’s token, XRP, was up a whopping 34% to 63 cents per coin shortly after the ruling, which has broader implications for other digital assets. Cardano surged more than 10%, and Solana rose by some 14%. The two largest cryptocurrencies, bitcoin and ethereum, also gained in response to the news, with bitcoin up 1.2% and ethereum notching gains of nearly 4%.
U.S. District Judge Analisa Torres ruled that Ripple’s token sales on public cryptocurrency exchanges did not constitute securities offerings. Torres found, though, that institutional token sales to sophisticated investors were securities transactions.
The ruling is good news for other so-called alt-coins that have argued that their assets shouldn’t constitute a security under the law and be subject to further SEC regulation.
“The judgments today are a huge step forward for the industry,” Chris Martin, head of research at Amberda, told CNBC. “By judging that XRP is not a security we’re starting to get clarity on what constitutes a security and what constitutes a commodity — the SEC will have to revise their tactics on several of their ongoing cases and I expect that this judgment will implicate several other tokens as non-securities.”
“For exchanges caught in ongoing SEC cases, it’s not clear how this judgment will affect them — they’ve only been involved in secondary sales for the most part. But as we can see with prices today, the market is very bullish on the judgments,” he added.
While last year was a terrible one for bitcoin and other digital assets, which ended the year in a deep crypto winter, 2023 has shaped up to be a good one for the cryptocurrency space.
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At the start of this year, bitcoin, weighed down by regulatory uncertainty and the collapse of crypto giant FTX, had fallen below $16,000 per coin, far lower than its record of $69,000 notched in 2021.
But now, bitcoin is punching in at about $30,900 and is around levels last experienced in June 2022. That represents nearly 86% growth from the start of this year, huge returns for just over six months.