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US court: Ripple can be freely traded on public crypto exchanges

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US court: Ripple can be freely traded on public crypto exchanges

The cryptocurrency provider Ripple Labs can book a legal success in the dispute with the US Securities and Exchange Commission (SEC). The US Federal Court for the Southern District of New York ruled on Thursday that the token XRP issued by Ripple does not constitute a classic security within the meaning of US case law as long as it is traded on public crypto exchanges such as Coinbase, Binance and Kraken. In this case, the SEC is not responsible as the supervisory authority, so Ripple does not have to follow their special requirements and protective mechanisms.


The so-called Howey criteria for a security do not apply if XRP is traded “programmatically” and is available to the general public, decided the responsible judge Analisa Torres (File number 1:20-cv-10832-AT-SN). The Howey-Test refers to a 1946 case before the US Supreme Court to determine whether a transaction qualifies as an “investment contract” and thus a security subject to the disclosure and registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934 subject. This should apply if it is a “money investment in a joint venture with the reasonable expectation that profits will be made from the efforts of others”.

At the same time, Torres judged that the Howey criteria apply if XRP is traded “institutional” and offered to individual potential buyers in a targeted manner. An investment agreement is signed with Ripple, so the purchase is subject to securities laws and SEC oversight. The stock exchange regulator had accused the company at the end of 2020for deliberately deceiving investors: Ripple Labs offered $1.3 billion worth of tokens to investors in the United States and worldwide without registering them as securities. As a result, information about the cryptocurrency and Ripple’s business model was withheld from potential buyers. Torres has now rejected the main part of this lawsuit, which experts had already expected.

The crypto industry, which largely does business on major online public marketplaces, is hailing the ruling as a major victory and a precedent. According to her, this will increase the scope for trading in cryptocurrencies in the USA. Immediately after the verdict was announced, the value of XRP skyrocketed, gaining over 60 percent from the previous day. The digital currency was trading at around 77 US cents as of Friday afternoon, its highest level in more than a year. Most recently, however, it fell by 8 percent again in the evening and was traded at 73 cents. Other crypto assets also temporarily benefited from the decision. The SEC announced that it would first examine the verdict closely. She left the aisle to the next authority open.

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