The U.S. District Court for the Southern District of New York recently issued a significant ruling regarding cryptocurrency regulation. In 2020, the U.S. Securities and Exchange Commission (the “SEC”) sued Ripple and two executives concerning Ripple’s XRP token and the sale thereof. The SEC alleged the XRP token was an unregistered security; thus, their sales of the XRP token amounted to illegal sales of securities. In response, Ripple argued that XRP was not a security. Judge Torres ruled that Ripple’s sales of XRP to institutional investors constituted an illegal sale of securities. However, the token was not considered a security when it was sold on digital asset exchanges to the general public. The distinction, according to the judge, depended on whether the buyers knew that their money could fund Ripple’s operations and result in the generation of potential profits. Certain elements of the case are still undecided, such as whether the two executives aided and abetted the illegal sales and can therefore be held responsible. However, there is already discussion emerging on this ruling, which may impact the SEC’s ongoing case against Coinbase, and within 24 hours following the ruling, XRP’s price increased by nearly 100%.
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