Did Ripple win yesterday’s legal dispute?

Although the court’s ruling on one of the most controversial cases in the history of digital currencies, which assets US regulators can classify as securities, was promising for many projects and investors, a closer look reveals that the decision of the judge in the Ripple case has many ambiguities.

According to Bloomberg, the 3-year legal battle between Ripple Labs, the Ripple blockchain developer, and the US Securities and Exchange Commission has entered a new phase after a federal judge’s ruling. According to the ruling, the Ripple token was a security several years ago when it was sold to institutional investors and not to the general public.

The main argument of Analisa Torres, the judge in the case, was that institutional investors were likely aware of Ripple’s similarities to securities at the time of its launch, but other investors, those who buy Ripple directly from cryptocurrency exchanges, including traders, were not. Khrod did not know about this issue.

Now, both Ripple and the Securities and Exchange Commission have reason to see the court’s outcome as a potential victory in their favor; Because this ruling gives credibility to the arguments of both sides in the debate of whether Ripple is a security or not.

However, extrapolating and extending the positive impact of the Ripple case ruling to other projects in the digital currency market will not be easy. First of all, this decision was made based on how many years ago, in a market period that ended in 2020 (2019), how well retail investors understood digital currencies. At the time, the price of Bitcoin was about the same as it is today, and regulatory bodies were just beginning to form a framework of opinions about the industry. The situation has clearly changed today.

Can the SEC win a court case by ensuring that the issue of whether or not securities are an asset is no longer clear to the public in the future? Maybe. This tactic has been a common feature of many of the body’s other complaints against digital currency exchanges such as Binance, Coinbase and Gemina this year. Where other tokens like Paligan or Elgorand can suffer the fate of Ripple.

However, citing the Howey test, the court disagreed with many parts of the SEC’s reasoning as to why Ripple is a security. Including the fact that Ripple made no promises to secondary market buyers, which is the case with most tradable products.

Also read: What is the Howie test?

Some people take the court’s initial decision to mean that the outcome of the case against Coinbase and others accused of listing assets that are likely to be securities is now clear. At least, when it comes to the general public buying from exchanges. While this ruling is likely to prevent a major upheaval in forcing small businesses to register or change their business model, that is not the end of the story.

These days, many successful digital currency projects rely on early token sales to institutional and venture capitalists before going public to build their businesses, often working with regulators first to avoid potential problems. Many tokens that, according to the Exchange Commission’s claim, are probably securities, have gone through this process, while this body considers them as reasons for its supervision of the digital currency market. After Thursday’s ruling, this form of project financing will cease unless venture capitalists are willing to buy tokens on the open market; When the price is subject to fluctuation like other tokens.

It should be noted that the list of actions of the United States Securities and Exchange Commission in the field of digital currencies is getting longer by the day. The watchdog was one of four organizations that filed a lawsuit against bankrupt cryptocurrency lender Celsius and its former CEO Alex Machinsky earlier Thursday. It also faces a long series of court hearings in lawsuits filed against exchanges such as Binance and FTX.

Ripple’s case is not over yet and the date of the next hearing will be announced after the legal formalities. So, while investors around the world may be celebrating Ripple’s rising price, there are still many troubling uncertainties surrounding the case.