The Southern District Court of New York ruled on the SEC's lawsuit against Ripple, concluding that Ripple's programmatic sales and other distributions of XRP do not constitute offers and sales of investment contracts; however, Ripple's institutional sales of XRP constitute offers and sales of unregistered investment contracts in violation of Section 5 of the Securities Act.
ConsenSys lawyer Bill Hughes explained the XRP court ruling:
- Ripple putting XRP on exchanges for trading (and funding their operation with those sales) is NOT an investment contract, and therefore not a security.
- Ripple paying people in XRP is NOT an investment contract and therefore not a security.
- Ripple selling XRP directly pursuant to contracts was an investment contract, and thus a security.
Ripple is acutely aware that doing so without registration is illegal and ultimately, a jury will decide whether Ripple executives aided and abetted this unregistered offering; the SEC is expected to immediately appeal to the Second Circuit Court of Appeals.
Bill Hughes also believes that the SEC's enforcement strategy has been severely undermined by this ruling. The pseudo-legislation through over-expansive rulemaking by the SEC has been seriously undermined
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Ripple
Policy and Regulation
