 | I'm old enough to remember things like IOTA's Microsoft partnership and Litecoin's Walmart partnership. So this is not the first time we're seeing amateur reporting in crypto. What was this judgement about? This judgement was only about motions for summary judgment regarding sales of XRP by Ripple, nothing else. All other claims will be determined by a trial. So what are the facts and circumstances around it? Ripple created 100 billion XRP. 20 billion XRP was given to the founders. 80 billion XRP was given to the company, Ripple. Ripple sold these tokens to institutional investors and "programmatically" on exchanges and also paid Ripple employees and insiders. Less than 1% of sales considered "programmatic" and payments to ripple insiders was ruled not a security offering (but the Judge's rationale on this will definitely be challenged as it's weak). Of course, the ruling says programmatic buyers are comparable to secondary market sales, which is NOT part of this case at all and that's why the Judge did not rule this in the SEC's favor (yet). You see that superscript #16? What does it say? Let's read it. "The Court does not address whether secondary market sales of XRP constitute investment contracts," because that is NOT part of the case brought by the SEC. Ripple's programmatic sales stopped way back in 2019. It was replaced by ODL sales (institutional). According to this judgement, all institutional sales is considered illegal security offering. Ripple ceased programmatic sales in 2019 Institutional sales amounted to nearly a billion dollars and there will be disgorgement and fines related to that. Why is the Judge's rationale on programmatic sales weak? Regarding institutional sales, the Judge's rationale was that investors would understand that Ripple would use the capital to market and develop XRP to increase the value of the asset. But regarding programmatic sales, the Judge does not apply this rationale saying buyers did not know whether the payments went to Ripple or some other seller. The argument for programmatic sales is weak because all 100 billion XRP tokens were issued by Ripple founders, and the ruling does not dispute the common enterprise but whether buyers of programmatic sales expect profits from the efforts of the third party, that is Ripple. If institutional buyers did, why not programmatic buyers? According to the Judge, it's because these are comparable to secondary market sales, which is not part of this case (this nuance is very important). Was there actually a ruling about XRP itself? No and that's not even the suit SEC filed. Every influencer account and crypto site took a little dictum and reported it as a judgement on XRP. This was not even examined! Read the text below carefully. The part about "XRP is not in and of itself a contract" is dictum. What that means is it's "not necessary" for an asset itself to be an investment contract. Not a ruling thereof. This case only pertains to sales of XRP by Ripple. Nothing else. The court is NOT actually examining if the token itself is a security in this judgement but "rather, the court examines the totality of circumstances" around different transactions and sales made by Ripple, and as there is explicitly no ruling on secondary sales. What about fair notice defense? The court ruled again that Howey applies to digital assets and the fair notice defense was ruled in favor of the SEC. So crypto companies cannot pursue this argument and all direct sales of XRP by Ripple was ruled illegal unregistered securities offering. Here is a statement from the SEC that they're pleased with the judgement. What does this mean for crypto? SEC scored multiple wins in this ruling. It's not as positive as it's being reported in crypto circles. A major implication people are missing from this is the Judge ruled that anything directly sold by Ripple was illegal. Ripple did not do an ICO. Every coin that did an ICO directly sold tokens to investors. [link] [comments] |
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