The price of cryptocurrency XRP (XRP-USD) rose 68% after Ripple Labs won the dismissal of some charges it was an unregistered security. This means you’re free to buy it on any exchange offering it.
Judge Annalisa Torres, an Obama appointee, ruled that sales of Ripple’s XRP made to individual investors do not violate securities laws. But XRP sold to institutional investors were securities, she ruled.
The Securities and Exchange Commission (SEC) charged Ripple and its founders with selling XRP as an unregistered security in December 2020.
Free to Trade XRP
The rule gives an all-clear for Coinbase (NASDAQ:COIN) and other exchanges to trade XRP online. Prices of other “secondary” coins rose sharply. Cardano (ADA-USD) was up 21%, and its market is now worth over $12 billion. Solana (SOL-USD) rose 24% and is now worth over $11 billion.
There were smaller gains for the main crypto coins. Bitcoin (BTC-USD) was up 2%, and Ethereum (ETH-USD) was up almost 6%. The total cryptocurrency market was worth about $1.25 trillion at 8:30 a.m. this morning.
SEC chair Gary Gensler has said that most crypto tokens are securities because buyers hope to profit from the efforts of their creators and promoters. He based this on the 1946 decision of SEC vs. Howey, which involved selling units in a citrus grove development. Existing securities laws don’t mention cryptocurrency.
Torres ruled institutions knew they were buying XRP from Ripple, thus, it was a security. Those buying XRP on exchanges, however, didn’t know if the seller was Ripple Labs. She dismissed charges related to $600 million of XRP Ripple sold on exchanges.
Owners of crypto exchanges celebrated the ruling, but Ripple still faces trial over the sales to institutions.
What Happens Next? And Should You Buy XRP?
It seems sales of crypto on exchanges are in the clear, but Congress could still weigh in to regulate the industry. Republicans want new laws giving the Commodities Futures Trading Commission (CFTC) authority over crypto. Democrats prefer it remains with the SEC.
As for the question of if you should buy XRP? You might want to wait for the results of the other half of the case involving Ripple’s institutional XRP sales.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
