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In a landmark ruling, the court has unequivocally determined that Ripple (XRP) is a security. This is significant, as the court has disregarded Ripple's "essential elements" test, labeling it as unfounded.
The court has found Ripple to be in violation of securities laws, specifically in relation to direct sales to institutional investors. As such, XRP is not only deemed a security, but questions have arisen regarding the legality of its offering. In regards to these sales, the court has confirmed that the law was indeed violated, marking a considerable victory for the Securities and Exchange Commission (SEC) and setting a precedent for its legal actions against other cryptocurrencies.
It is important to note that institutional investors who purchased directly from Ripple may find themselves subject to class-action litigation as potential underwriters. This is an area to watch closely, especially if big-name venture capitalists were involved.
However, the court has clarified that the so-called "programmatic sales" made on digital currency exchanges did not constitute illegal security sales. This ruling is based on the notion that Ripple did not engage in illegal sales practices in this particular context. Nevertheless, it does not absolve the exchanges from potential liability for offering an unregistered security.
The court further stated that other sales, especially those made on exchanges by the founders, were not in breach of securities laws. Yet, similar to the previous point, this ruling does not preclude exchanges from potential violations of the Securities Exchange Act of 1934.
Ripple's claims of due process violation were dismissed by the court, which held that the defendants had "fair notice" of their infringement. This could have significant implications for similar claims by Coinbase, should they allege lack of notice.
The SEC has insisted that the final claim, which concerns the extent to which the founders aided and abetted Ripple's violations, should proceed to trial. Therefore, further legal action may ensue unless a settlement is reached.
These findings highlight the ongoing and evolving nature of the regulation of cryptocurrencies. The legal landscape continues to change, and we urge all parties to stay informed of these important developments.
