The news of Ripple’s recent partial victory against the SEC after a legal battle that lasted almost three years sent a ripple of joy throughout the crypto industry. However, ACCORDING to a legal expert on Twitter, Attorney Bryan Jacoutot, the victory will be short-lived because the SEC has sufficient grounds to appeal the decision and drag this matter out for a longer time.
The SEC’s Lawsuit Against Ripple Labs
The SEC filed a lawsuit against Ripple Labs in December 2020, alleging that Ripple conducted an unregistered securities offering worth more than $1.3 billion through the sale of XRP. According to the SEC, XRP is a security under federal securities laws. But the court ruled on June 13 that the random “programmatic sale” of XRP to regular investors did not constitute the sale of an unregistered security under Howey.
However, sales to institutional investors fall under Howey, which is used in the United States to determine whether a transaction qualifies as an investment contract. In this case, the Court found that buyers would not know who sold them XRP, unlike institutional investors who would expect Ripple Labs to use the capital for improving the Ripple ecosystem.
According to Jacoutot, the Court’s rationale is weak and Howey made a mistake in the case. The Court argued that regular investors bought XRP fully aware that it was subject to the general trend of the cryptocurrency market, especially the secondary sale of XRP tokens. However, Jacoutot believes that those who buy XRP are also expected to profit from Ripple Labs’ efforts.
XRP price at $0.7254 | Source: XRPUSD on Tradingview.com
The lawyer also made a case of the Ethereum Foundation, because everyone who participated in the pre-sale of ETH knows that they are buying from the Ethereum Foundation. When looking at XRP ruling the same way, it means that institutional investors in the ETH presale also bought unregistered securities.
What Does Rule Mean?
According to Jacoutot, that ruling opens some loopholes that can be exploited. In a tweet by attorney Joe Carlasare on Twitter, it explains that the logic of the judgment leaves an opening that can be used to legally launch a pyramid scheme. In this case, profits from “programmatic sales” to retail investors can be distributed to institutional investors.
Ripple CEO Brad Garlinghouse has SAYS the ruling provides relief and that the company can now promote different use cases for Ripple and its technology without worrying about legal repercussions.
This is certainly a victory for Ripple, but an appeal to the SEC could drag out the legal battle for years and create another round of major uncertainties in the crypto market.
The price of XRP surged after the ruling. It is now up 50% this month and is currently trading at $0.7154.
Featured image from Bit2Me Academy, chart from Tradingview.com
