Opinion: The court’s XRP ruling is not just a win for Ripple. It’s good for the token space

Written by Mel Gelderman

Posted on July 18th, 2023

A judge has ruled that XRP is not a security in Ripple’s high-profile legal battle with the SEC. Mel Gelderman explains why this is a win for the broader space.

Token fans got a positive shock last week as Ripple scored a major win in its court battle with the SEC. A judge declared that Ripple’s XRP sales on exchanges did not constitute illegal securities offerings in a significant turn in the highly anticipated case. Unsurprisingly, XRP and the market surged in response. There’s a good reason for this, and I’ll explain why below.

“If XRP is not a security, it’s difficult to argue that other tokens are.”

The SEC filed suit against Ripple over XRP’s security status in December 2020. Since then, the US regulator has gone after many exchanges and token projects, including household names like Coinbase, Solana, and Polygon. As the SEC aims to fight the token space over securities regulations, the Ripple case could end up setting a precedent for the industry. If XRP is not a security, it’s difficult to argue that other tokens are. 

Do securities laws work for tokens? 👨‍⚖

Many key industry stakeholders have argued that securities laws should not apply to tokens. US securities laws have been around for decades, whereas tokens are a very young technology. They fear that using old laws and stringent regulations could stifle innovation. 

“The outcome of this case isn’t the be all and end all for tokens.”

It’s still difficult to see how the future of token regulation will play out. Notably, the court said that Ripple’s XRP sales to institutions may have fallen into the security bracket. Still, the update has been seen as an overwhelmingly positive step forwards. It’s no secret that the SEC has been on a warpath against tokens over the past year. This update suggests that it could be fighting a losing battle. 

I’m pleased to see the court rule against the SEC in this instance, but the outcome of this case isn’t the be all and end all for tokens. A Ripple win would instil confidence in the market and create a more welcoming environment for tokens in the US. But make no mistake: this technology is unstoppable. Regulation may be coming, but it won’t stop mass token adoption. 

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