In December 2020, Ripple was sued by the US SEC. After three years of hard legal battles, Ripple finally ushered in

A "short-lived" victory.

Tonight, a U.S. federal judge ruled that Ripple

Therefore, the sale of XRP tokens by algorithmic programs does not constitute an investment contract.

agreement (not violating securities laws), but the court also supported

The SEC’s motion states that institutional token sales do violate

Federal securities laws. As soon as the news came out, the price of xRP rose from 0.473

USDT once soared to 0.64 USDT, with the highest increase of more than 35% in one hour.

In this ruling, neither the SEC nor Ripple is a complete winner in the true sense. There is no clear conclusion on whether XRP is a security. However, the news spread quickly and was seen as a big positive for the crypto market to resist the SEC. Especially with the current Coinbase and Binance

The SEC lawsuit against the crypto giant cast a shadow over the entire crypto market, and Ripple's victory is particularly exciting at this time. The crypto community shouted that XRP's small step is a big step for crypto.

Odaily Planet Daily noticed that there are also some details worthy of attention in the court’s judgment.

First, the court supported the SEC's motion, namely Ripple

The sale of tokens by the institution constituted an unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act. The court made its ruling based on three aspects of the Howey test: • The second step of the Howey test, that is, whether there is a "common enterprise"; the court found that there was a common enterprise because the record

Indicates the existence of a pool of assets and the fate of institutional buyers

Successful connections to corporate and other institutional buyers

together.

• The third step of the Howey test examines whether the economic realities of Ripple’s institutional sales led institutional buyers to “have a reasonable expectation of profit from the entrepreneurial or managerial efforts of others.”

The Court believes that reasonable investors in the position of institutional buyers would

Buy XRP and expect them to benefit from Ripple’s efforts

profit from it.”

Interestingly, the court ruled that Ripple

The court held that the programmatic sale of XRP tokens did not constitute an investment contract because the programmatic sale did not meet the third prong of the Howey test, which is a reasonable expectation of profit. The court held that institutional buyers reasonably expected that Ripple would use the funds it received from the sale to improve the XRP ecosystem.

system, thereby increasing the price of XRP. However, programmatic buying

“Ripple’s programmatic sales are blind buy and sell transactions, and programmatic buyers don’t know whether their money is going to XRP or any other XPP.

Since 2017, Ripple’s programmatic sales have accounted for less than 1% of global XRP trading volume. Therefore, the vast majority of individuals who buy XRP from digital asset exchanges have not invested in XRP at all. Institutional buyers buy XRP directly from Ripple under contracts, but the economic reality is programmatic.

Buyers and secondary market buyers (i.e. exchanges) don’t know who their money is going to.”

Ultimately, the court ruled that Ripple’s programmatic sales of XRP were not

The court also ruled that the use of XRP for investments in other people, bounties, grants, and transfers to executives did not constitute investment contracts and did not violate securities laws.

As the United States is the master of maritime law, this XRP ruling also

Provide precedents for subsequent cases involving other cryptocurrency projects.

In particular, selling tokens through programs does not violate securities laws, which directly proves that exchanges opening token transactions do not violate securities laws. However, it is best not to sell tokens through ICO/EO, etc., because this may be deemed to meet the conditions for institutional sales. Odaily Planet Daily will continue to pay attention to the follow-up progress of the Ripple case.