Ripple is claiming victory in a court order issued today that determined the company did not violate securities laws when it initially offered XRP to investors – at least in part. At the same time, the order did indicate that the manner of sale did violate certain securities laws. Responses so far have been a bit mixed, but XRP has rallied on the news, with Ripple CEO Brad Garlinghouse touting a big victory for the firm.
Below is the court Order with the finding on page 27, where the court states:
“… XRP sales were programmatic sales on various digital asset exchanges through blind bid/ask transactions. See SEC 56.1 Resp. ¶¶ 280–84, 306–09. Larsen and Garlinghouse did not know to whom they sold XRP, and the buyers did not know the identity of the seller. Thus, as a matter of law, the record cannot establish the third Howey prong as to these transactions. For substantially the same reasons discussed above, supra § II.B.2, Larsen’s and Garlinghouse’s offer and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts.”
The most important part of this ruling:
“XRP, as a digital token, is not in and of itself a “contract, transaction[,] or scheme” that embodies the Howey requirements of an investment contract.”
This is a now a matter of law (not up for trial.)
— Brad Garlinghouse (@bgarlinghouse) July 13, 2023
As one part of Howey is not substantiated, the court does not pursue the other aspects of Howey in determining whether or not an asset is a security.
The court concludes:
“…the SEC’s motion for summary judgment is GRANTED as to the Institutional Sales, and otherwise DENIED. Defendants’ motion for summary judgment is GRANTED as to the Programmatic Sales, the Other Distributions, and Larsen’s and Garlinghouse’s sales, and DENIED as to the Institutional Sales.”
Trial dates to follow as the legal odyssey continues.
