Ripple XRP Sales Do Not Constitute Offer of Investment Contract

Ripple Labs has won an important victory in its case with the SEC, with Judge Torres ruling that sales of the XRP token made on exchanges to retail investors did not constitute offerings of unregistered securities.

It wasn't all good news for Ripple, and the case is not over, but this ruling is an important win for the company that has far-reaching implications for the rest of the crypto sector.

Secondary Sales Are Not Securities Offerings

Firstly, the bad news: The court ruled that Ripple's direct sales of XRP to institutional investors did constitute sales of unregistered securities. This is in violation of the securities act, and will need to play out through the courts. The most likely outcome is a fine (possibly a large one) for Ripple Labs.

The good news is that all other sales, including sales to retail traders on exchanges, do not fall into this category. Overall, this development far outweighs the issue of Ripple originally issuing unregistered securities (which would not be the first time this has happened in the crypto world).

A Setback For Gensler

The court's ruling for the wider crypto world is significant. It is a major precedent that—all things being equal—will make it harder for the SEC to prove its case against Coinbase. It makes it more likely that the court will recognize ETH as a commodity, not a security.

The reaction from the crypto world was immediate. XRP spiked 30% in a matter of minutes. Additionally, XRP will now be relisted on exchanges that previously delisted it as a precaution during the case. Coinbase's Chief Legal Office, Paul Grewal tweets:

The wider market also took heart from the news, with bitcoin making a new local high above $31,800.

It's just one battle in the war between crypto and the SEC, but it's a big one, and a victory for decentralized assets.

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