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Ripple Labs Wins Landmark Suit Filed by the US SEC

In a significant legal win for the crypto sector, Ripple Labs’ sale of its XRP token on open markets was found to have not breached federal securities legislation. The ruling was made by Judge Analisa Torres, and it represented the first win for a cryptobusiness in a legal battle instituted by the U.S. Securities and Exchange Commission (SEC).

Despite being unique to this case, the ruling is anticipated to benefit other cryptocurrency companies engaged in similar legal disputes with the SEC over regulatory issues.

Brad Garlinghouse, Ripple’s CEO, welcomed the decision as a big victory for both Ripple and the larger cryptocurrency market in the country.

Following this ruling, Coinbase Global Inc. (NASDAQ: COIN), the biggest crypto exchange in the United States, declared it would permit XRP trading on its trading platform again. Paul Grewal, the platform’s top legal officer, revealed on Twitter that his team had reviewed the ruling and were prepared to list XRP again.

The SEC had charged Ripple and its past and current executives with operating an unregistered securities offering for $1.32 billion by selling XRP, a coin developed by Ripple’s inventors in 2012. The issue received a lot of attention from the cryptocurrency community, which challenges the SEC’s assertion that most crypto tokens meet the criteria for securities and are therefore covered by its rules protecting investors.

Although the SEC has brought more than 100 enforcement proceedings concerning cryptocurrencies, frequently asserting that various tokens qualify as securities, many of these instances have been resolved through settlements. Where legal battles have erupted, judges have typically sided with the SEC’s assertion that the crypto assets were securities.

Unlike commodities, securities must adhere to tight laws, and their issuers must register them with the regulator and thoroughly disclose any potential hazards to investors.

Judge Torres ruled that, notwithstanding the fact that buyers did not reasonably anticipate profits associated with Ripple’s activities, the XRP sales made by the company on open crypto exchanges didn’t constitute securities offers. She termed these transactions “blind ask/bid transactions”” because purchasers were unable to tell which XRP vendors their money was going to.

Torres referred to a United States Supreme Court decision that defined an investment contract — a sort of security — as a financial commitment made in a group venture where benefits would only accrue through the labor of others. Her ruling also found that additional payments and compensations, including the executives’ XRP transactions on cryptocurrency exchanges, did not constitute securities.

The ruling is anticipated to help Coinbase during its own legal dispute with the SEC because both issues concern the need for registration and whether or not particular digital assets qualify as securities as per existing U.S. law.

The verdict has generated new calls for politicians to define the categorization of virtual/digital assets as the crypto industry pushes Congress to pass legislation that gives clear parameters for tokens.

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