On July 13, 2023, United States District Court Judge Analisa Torres ruled that Ripple’s XRP (XRP) token should not be considered a security when sold on retail digital asset exchanges.
Stuart Alderoty, chief legal officer at Ripple, told Cointelegraph that last week’s ruling makes it clear that the U.S. Securities and Exchange Commission’s (SEC) theory that a token can be an investment contract and, therefore, a security, no longer has support in the law.
He said of the ruling: “That is not only a huge win for Ripple, but it’s a win for all of crypto in the United States. The SEC can no longer tout their record in crypto, which was, up till now, by and large, settlements with players that didn’t have the resources to fight back.”
While this may be, New York Representative Ritchie Torres told Cointelegraph that the Ripple decision reveals a cruel irony in securities law. He said:
“It protects institutional investors while leaving retail customers exposed, even though the latter arguably requires more protection than the former. For me, the lack of protection for retail investors underscores the fierce urgency around passing a market structure bill to protect the average American consumer.”
Torres elaborated on this remark, commenting on his plan to help ensure the passing of a crypto market structure bill, and his support for blockchain technology and cryptocurrency innovation.
Crypto regulation by enforcement had a dreadful day in court.
In light of the SDNY’s landmark decision in the Ripple case, @SECGov must reassess its reckless regulatory assault on the crypto industry.
My letter to Chair Gensler: pic.twitter.com/Mrk63N4KhH
— Rep. Ritchie Torres (@RepRitchie) July 18, 2023
Cointelegraph: Can you please explain the meaning behind the recent XRP court ruling?
Torres: The Southern District of New York’s decision makes two critical distinctions. First, it draws a distinction between securities and assets that are part of investment contracts, which qualify as securities under the Howey test. The decision establishes what I describe as the “Torres Rule,” which holds that digital assets are not in themselves securities that can be sold as investment contracts that qualify as securities under the Howey test.
Secondly, it distinguishes between institutional buyers and retail buyers. If you are an institutional buyer that purchases a crypto token directly from an issuer or promoter, then that transaction is a security offering….
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