Ripple Labs achieved partial victory in its case before the US Securities and Exchange Commission (SEC) on July 13, 2023.

The US District Court for the Southern District of New York ruled that the offer and sale of Ripple’s XRP token on digital asset exchanges and through algorithms did not amount to offers and sales of investment contracts, ruling that XRP is not a security.

However, the court also found that XRP is a security when sold to institutional investors, as it met the conditions set out in the Howey Test. The court found that Ripple first sold around $728.9 million worth of XRP directly to institutional buyers, hedge funds, and other parties. These “institutional sales” constituted the unrecorded offer and sale of investment contracts in violation of federal securities law.

The SEC was unable to conclusively state that speculative investors had a reasonable expectation of gaining from the entrepreneurial or managerial efforts of others, leading the court to conclude that programmatic XRP sales did not qualify as security sales.

After the court decision, Ripple’s XRP saw a significant increase in both its market cap and price. The price of XRP skyrocketed, rising almost 100% and reaching a high of $0.938. Although it has since experienced a slight dip, at the time of writing, XRP is still performing solidly, hovering around $0.8.

XRP is now the fourth-largest cryptocurrency by market cap after seeing its market cap rise over $21 billion in just three hours to hit a new yearly high of $46.1 billion.

The decision led to a flurry of XRP buying activity, causing American crypto exchange Uphold to temporarily fall due to increased volume. Uphold was one of the few largest US-based cryptocurrency exchanges that continued to offer XRP sales.

The ruling also sparked a flurry of relisting activity on US exchanges, with Coinbase, Kraken, and iTrustCapital making XRP available for trading on their platforms. Gemini, a crypto exchange owned by the Winklevoss twins, has hinted that it will also look to re-list XRP in the near future.

The SEC’s lawsuit against Ripple Labs began in December 2020, with the SEC alleging that Ripple was offering unregistered security. The case has seen several dramatic turns in the past three years, including the release of the “Hinman Documents” and ongoing defiance from Ripple CEOs Brad Garlinghouse and Chris Larsen.

The ruling has prompted comments from key figures in the crypto community. Twitter KOL ricenbeats0x commented: “If including XRP in exchanges doesn’t make it a security, the SEC case against Coinbase is toast.” Similarly, adamscochran.eth noted that “XRP was probably the easiest coin the SEC could have used in the Coinbase case.”

Despite the ruling, legal experts suggest that it does not fully resolve the question of whether and under what circumstances a digital asset meets the definition of value under US law. The cryptocurrency industry will be watching for further developments in this ongoing legal saga.

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