As an experienced securities analyst, I believe that the ongoing investigation into Ripple and its native token XRP is a significant development in the cryptocurrency industry. The recent ruling by Judge Phyllis Hamilton that XRP functions as a security when offered to retail investors adds complexity to the regulatory landscape for digital assets.
In a 2017 interview, Ripple CEO Brad Garlinghouse’s words led California authorities to launch a securities probe. According to District Judge Phyllis Hamilton’s ruling, XRP, Ripple’s native digital token, qualifies as a security when marketed towards individual investors. The judge based her decision on the Howey Test, which considers if there is an expectation of profits and an investment of money in a common enterprise with a reasonable anticipation of profits derived from the efforts of others.
The judge doesn’t believe that it can be concluded as a fact that an ordinary investor would have anticipated earning profits solely based on the overall trends in the cryptocurrency market, rather than Ripple’s initiatives to simplify XRP transactions for cross-border payments and other similar endeavors.
In contrast to Ripple’s victory against the SEC in 2023 based on similar grounds, Judge Hamilton asserts that XRP qualifies as a security. Ripple attempted to dismiss this case due to the influential ruling delivered by Judge Analisa Torres in the SEC vs. Ripple Labs, Inc. trial. However, Judge Hamilton has rejected this dismissal request.
The troubles for Ripple’s securities began with comments made by Garlinghouse during a 2017 interview on BNN Bloomberg in Canada. He declared, “I hold a significant amount of XRP, personally. I am heavily invested in XRP.” However, the lawsuit asserts that these statements were deceitful, as Garlinghouse had sold large quantities of XRP tokens that very year.
According to Judge Hamilton’s ruling on June 20th, the case against Ripple and Garlinghouse in the Northern District of California will proceed. The jury will be responsible for determining if Garlinghouse’s statements during his 2017 interview deceived investors. Furthermore, four other charges against Ripple for not registering XRP as a security were dismissed in the order. One charge remains to be addressed.
Image by Miloslav Hamřík from Pixabay
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2024-06-22 22:37