The ongoing dispute between the US Securities and Exchange Commission (SEC) and Ripple Labs has taken a new turn. On January 15, the SEC filed an appeal against Judge Analisa Torres’ ruling in July 2023, which granted Ripple a partial victory. This move by the SEC has sparked a renewed debate within the cryptocurrency community regarding the classification of XRP.
The SEC has accused Ripple of selling XRP as unregistered securities, violating US federal law. Although last year’s ruling provided some relief for Ripple, the SEC has demonstrated its unwavering stance by filing an appeal, primarily focusing on whether the sale of XRP to retail investors qualifies as unregistered securities transactions.
Using the well-known Howey Test as a foundation, the SEC argues in the lawsuit that Ripple’s marketing and promotional efforts created an expectation of profit among investors. According to the test, this would classify XRP as an investment contract. In other words, the SEC believes that Ripple sold a promise of financial return, which falls under the definition of a security.
This prolonged battle has generated extensive discussions within the cryptocurrency market. The classification of XRP as a security has significant implications for Ripple and the entire crypto ecosystem. If XRP is deemed a security, it will be subject to stricter regulations, potentially affecting its adoption and value. Conversely, a victory for Ripple in this legal battle could establish an important precedent for other cryptocurrencies.
It is important to note that the SEC’s lawsuit against Ripple began in 2020, accusing the company of trading XRP as an unregistered security. In 2024, Ripple was ordered to pay a $125 million fine, a significantly lower amount than the original $2 billion demanded by the SEC.
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Ripple
SEC
XRP