- XRP price hovers around the $0.70 level, down 28% from its recent top of $0.965.
- The fate of the remittance token has been pulled from safety after Judge Jed Rakoff rejected the distinction made in the Ripple case.
- Investors can expect a 25% crash in the near term if the SEC decides to appeal Judge Torres’ decision.
The SEC vs. Ripple lawsuit that began in late 2020 reached a conclusion in July 2023, which proved costly for the regulator. The judge involved in the lawsuit gave Ripple a partial victory, which is now under question and could be overturned. The outcome of the SEC vs. Ripple lawsuit ensured that the community of XRP holders is in the safe zone, with regards to their trades across exchange platforms. The recent proceedings in the SEC vs. Terraform Labs case raised questions on the SEC vs. Ripple victory.
Due to the developments over the last 24 hours, XRP price could easily drop and undo last month’s gains if the Securities & Exchange Commission (SEC) decides to appeal the ruling in Ripple’s lawsuit.
SEC vs Ripple lawsuit FAQs
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
XRP price and the worst-case scenario
In the event that the SEC appeals Judge Analisa Torres’ decision on the XRP token, its holders could be in trouble. XRP price is down 28% from the SEC vs. Ripple lawsuit decision-based rally that propelled it by 100% to $0.965 on July 13.
Also read: XRP retail holders made biggest winners from Torres’ decision, technology policy expert says
Since then, the remittance token continues to consolidate between the $0.965 and $0.666 levels. The recent rug pull of BALD meme coin combined with the Curve Platform’s hack was soon followed by a nearly two percent drop in Bitcoin price.
A rug pull is when the developer in charge of a project pulls all the liquidity from the decentralized exchange, causing it to freefall to zero. Regardless, the recent market developments have had very little effect on Bitcoin and other cryptocurrencies’ prices. However, if the ruling in the SEC vs. Ripple lawsuit is called into question formally, then XRP price could break out of the range and easily shed 25%.
Such a move would knock XRP price to the next stable support level of $0.520. In a dire case scenario, the altcoin could dive as low as $0.392 and collect sell-side liquidity resting below equal lows.
XRP/USDT 1-day chart
On the other hand, if the SEC does not appeal or the appeal gets rejected, XRP price could continue its rangebound movement. In a conservative scenario, the remittance token could revisit the range’s midpoint at $0.761.
Ripple FAQs
Ripple is a payments company that specializes in cross-border remittance. The company does this by leveraging blockchain technology. RippleNet is a network used for payments transfer created by Ripple Labs Inc. and is open to financial institutions worldwide. The company also leverages the XRP token.
XRP is the native token of the decentralized blockchain XRPLedger. The token is used by Ripple Labs to facilitate transactions on the XRPLedger, helping financial institutions transfer value in a borderless manner. XRP therefore facilitates trustless and instant payments on the XRPLedger chain, helping financial firms save on the cost of transacting worldwide.
XRPLedger is based on a distributed ledger technology and the blockchain using XRP to power transactions. The ledger is different from other blockchains as it has a built-in inflammatory protocol that helps fight spam and distributed denial-of-service (DDOS) attacks. The XRPL is maintained by a peer-to-peer network known as the global XRP Ledger community.
XRP uses the interledger standard. This is a blockchain protocol that aids payments across different networks. For instance, XRP’s blockchain can connect the ledgers of two or more banks. This effectively removes intermediaries and the need for centralization in the system. XRP acts as the native token of the XRPLedger blockchain engineered by Jed McCaleb, Arthur Britto and David Schwartz.
Experts believe Ripple ruling is in trouble after this court decision in the SEC v. Terraform Labs case
Judge Jed Rakoff rejected Judge Analisa Torres’ ruling from July 13, in which Torres declares that Ripple did not violate securities laws by selling XRP on crypto exchanges. Experts and attorneys on crypto Twitter analyzed Judge Rakoff’s comments and stated that the Ripple ruling is in trouble. In the SEC v. Terraform Labs case, Judge Rakoff has specifically rejected Judge Torres’ application of the Howey test and argued that the test makes no distincting between secondary market purchases and institutional purchases of XRP.
Newsflash: Ripple Decision Already in (Big) Trouble
SDNY District Judge Jed Rakoff today allowed the SEC to go forward with its case against Terraform Labs and founder Do Kwon. In doing so, Judge Rakoff specifically rejected the distinction made in the Ripple case between public… pic.twitter.com/JZZ8vukfFt
— John Reed Stark (@JohnReedStark) July 31, 2023
Judge Torres’ ruling and Ripple’s partial victory are likely in jeopardy, it remains to be seen whether the SEC appeals to the second circuit and whether Judge Torres’ ruling is overturned.
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