Judge Rules XRP Sale on Exchanges Not a Security

  • A federal judge ruled that the sale of XRP through exchanges and algorithms did not qualify as selling securities, which could have a major impact on several SEC lawsuits.
  • The institutional sale of the token, however, did violate federal securities laws, and the lawsuit between the SEC and Ripple will have to go to trial.


The U.S. Securities and Exchange Commission’s (SEC) lawsuit against Ripple will go to trial after a federal judge granted summary judgment motions from both sides, court documents from 13 July show.

According to the filing, Southern District Court of New York Judge Analisa Torres declined to make a conclusive decision on the lawsuit between the regulator and the company, and instead granted summary judgment motions from both sides. Judge Torres ruled that while the sale of Ripple’s native token, XRP, through exchanges and algorithms did not constitute an investment contract, its institutional sale did violate federal securities laws. The court document reads:

“For the foregoing reasons, the SEC’s motion for summary judgment is GRANTED as to the Institutional Sales, and otherwise DENIED. Defendants’ motion for summary judgment is GRANTED as to the Programmatic Sales, the Other Distributions, and Larsen’s and Garlinghouse’s sales, and DENIED as to the Institutional Sales.”

The SEC filed a lawsuit against Ripple, its CEO Brad Garlinghouse, and co-founder Christian Larsen back in 2020, alleging they broke securities laws by failing to register the XRP token as security. In her partial judgement, Judge Torres ruled that the initial sale of around $728.9 million worth of XRP to institutional buyers and hedge funds did constitute the unregistered offer of investment contracts in violation of federal securities law, as investors would have purchased the token with expectation of profit.

The judge also ruled that “programmatic sales” of the token through exchanges and algorithms did not qualify as selling securities as the regulator could not prove that speculative investors had a “reasonable expactation of profits”. Garlinghouse and Larsen’s own sale of XRP, as well as “distributions to employees as compansation and to third parties” also did not qualify as selling securities.

Thursday’s ruling could turn out to be a major win for the crypto community, as it could help determine how crypto tokens are viewed under U.S. securities law. The decision that selling crypto through exchanges — and not to institutional investors — do not constitute securities could potentially influence a number of lawsuits that the SEC has filed against several platforms and exchanges.

Related Coverage
SEC Staff Asked Coinbase to Delist all Crypto Except BTC Before Lawsuit
  • During an interview with FT, CEO Brian Armstrong said that before the lawsuit a SEC staff member had said that all crypto except BTC was security, and should be delisted.
  • When asked how he came to that conclusion, the SEC staff member reportedly said “we’re not going to explain it to you, you need to delist every asset other that Bitcoin”.
July 31, 2023, 1:26 PM
Coinbase CEO Brian Armstrong appears on stage at the 2014 TechCrunch Disrupt Europe/London

Coinbase CEO Brian Armstrong appears on stage at the 2014 TechCrunch Disrupt Europe/London, at The Old Billingsgate on October 21, 2014 in London, England. Anthony Harvey/Getty Images for TechCrunch

Judge Rejects Binance’s Complaint Over ‘Misleading’ SEC Statements
  • Binance had filed a complaint against a 17 June SEC press release, claiming that the regulator had made “misleading” statements that could have tainted the jury pool.
  • The presiding judge rejected the complaint by saying that it was not the court’s mandate to “wordsmith” public statements, and that it was not clear if the statements had any effect on the case.
Invesco and WisdomTree Join the Race for Spot Bitcoin ETF
  • Investment firms Invesco and WisdomTree both followed the example of BlackRock from last week, and filed for their own spot Bitcoin ETFs with the U.S. SEC.
  • Although the SEC is yet to approve a single spot Bitcoin ETF product, ETF analysts say there is a good chance BlackRock is the first considering its history with ETFs.