Ripple Debunks Misconceptions Surrounding SEC vs XRP Ruling in Report

A recent report by Ripple addresses XRP misconceptions, clarifying the Court’s stance and dispelling false notions.

by Kyle Calvert. Fact checked by: Ciaran Lawler, Editor: Stefan Trapp

Published: August 2, 2023 │ 1:20 PM GMT

CEO of Ripple and XRP, Brad Garlinghouse setting the record straight about the lawsuit. — *Created by Kornelija Poderskytė from DailyCoin*

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In the wake of the recent XRP ruling, there has been a flurry of misconceptions circulating within the cryptocurrency community, necessitating a closer examination of the court’s decision. A recent report by Ripple addresses XRP misconceptions, clarifying the Court’s stance and dispelling false notions. By dissecting each misconception, the company seeks to counter misinformation and clarify XRP’s regulatory status in the United States.

Misconception 1: The decision is a split decision

This case’s essence was clarifying XRP’s US regulatory status. Ripple consistently contended XRP isn’t a security, affirmed by the Court. Beyond that, the ruling sets a precedent, establishing the tokens’ non-security nature—a notable triumph for Ripple and the industry.

Misconception 2: The decision suggests XRP is a security in certain circumstances but not others

Quite the contrary, XRP inherently isn’t a security. The Court distinctly stated XRP, as a digital token, doesn’t inherently equate to an investment contract or security. While coupled with promises, like an orange grove bundled with rights, it can be treated as an investment contract. But the core asset, XRP, remains unaltered.

Misconception 3: It doesn’t make sense to classify certain XRP transactions as securities while others are not

The determination of an investment contract must be based on the unique circumstances of each transaction. This differs from traditional shares of stock, which are consistently treated as securities. Owning a share of stock in a company establishes a fiduciary duty, irrespective of how it was acquired or who sold it.

Misconception 4: The decision prioritizes protecting sophisticated institutions over retail buyers

The Court’s stance doesn’t favor sophisticated institutions over retail buyers. The verdict’s scope is the SEC’s jurisdiction, confined to securities. The absence of an investment contract implies no security, curtailing the SEC’s role. Shielding retail crypto traders mandates thoughtful legislation, a gap Ripple aims to address through collaborative regulatory efforts.

Misconception 5: The decision hampers Ripple’s ability to conduct business

Since the SEC’s lawsuit in December 2020, Ripple’s major dealings shifted beyond US boundaries, aligning with clear foreign regulations. Diverse foreign regulators endorsed XRP’s non-security status, buttressing Ripple’s global operations.

Misconception 6: The Court rejected Ripple’s fair notice defense entirely

The Court partially rejected Ripple’s fair notice defense regarding “Institutional Sales” yet left room for other case-related transactions. This reflects a potential defense avenue, signaling a benchmark for challenging baseless SEC theories.

On the Flipside

While the Court’s decision touches on consumer protection, the absence of a stringent regulatory framework could potentially expose retail crypto traders to risks.
Foreign regulators in various countries have concluded that XRP has not been deemed a security, heightening the challenges of global harmonization in cryptocurrency regulation as regulatory approaches have differed between countries.

Why This Matters

The court’s decision on XRP’s regulatory status carries significant implications for Ripple and the entire cryptocurrency industry. By affirming that XRP is not a security, the ruling sets a precedent for other tokens’ classification and strengthens the case for clear regulatory guidelines.