The crypto industry secures an early victory in the legal battle with regulators

The cryptocurrency industry scored an early victory in its court battle with US regulators when a federal judge ruled Thursday that selling on public exchanges of a digital asset called XRP complied with securities laws.

For years, the SEC has argued that digital assets constitute securities, such as stocks and bonds traded on Wall Street, and must be subject to the same stringent regulations. Last month, the Securities and Exchange Commission (SEC) sued two of the largest cryptocurrency exchanges, Coinbase and Binance, accusing them of marketing unregistered securities to the public.

But Thursday’s ruling in a case involving cryptocurrency firm Ripple could complicate that argument and provide fodder for the cryptocurrency industry to defend itself in court.

The Securities and Exchange Commission (SEC) sued Ripple in December 2020, accusing the company of violating securities laws in one of the first major legal battles related to cryptocurrency. In the 34-page ruling on Thursday, Judge Annalisa Torres of the US District Court for the Southern District of New York said Ripple did not violate the law when the cryptocurrency it created, XRP, was sold on public exchanges.

The ruling was not a complete victory for the industry. Judge Torres also found that Ripple violated securities law when it sold XRP to institutional investors, such as high-end hedge funds.

A spokesman for the Securities and Exchange Commission said in a statement that the agency is reviewing the decision. “We are pleased that the court found that XRP tokens were offered and sold by Ripple as investment contracts in violation of securities laws in certain circumstances,” the statement said.

A representative for Ripple did not immediately respond to a request for comment.

Ripple was founded in 2012 by a group of developers including Chris Larsen, who has long been ranked among the richest cryptocurrency CEOs in the world. The company’s mission was to facilitate international payments using the XRP token.

Over the years, the token has become one of the most valuable cryptocurrencies in the market, and Ripple has developed a loyal following online. But the lawsuit filed by the Securities and Exchange Commission cast a shadow over the company.

A resolution in the case was widely expected in the cryptocurrency industry, and prominent executives celebrated Judge Torres’ ruling as an important victory.

“Big win today,” Ripple’s chief legal officer, Stuart Aldrotti, said. books on Twitter. “Sales on stock exchanges are not securities.”

Tyler Winklevoss, Co-Founder, Gemini Exchange, chirp“Adios Gary,” referring to Gary Gensler, the SEC chief who led the government’s crackdown on the cryptocurrency industry.

But the Ripple ruling does not mean that the cryptocurrency industry will win its other cases. In the lawsuits filed against Binance and Coinbase, the Securities and Exchange Commission (SEC) has argued that a wide range of cryptocurrencies constitute securities. Judges in those cases will have to make separate decisions on whether the sale of those digital assets is against the law.