XRP Token Not a Security, Judge Rules, But Ripple's Institutional XRP Sales Broke The Law

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In a split decision Tuesday that may have implications for future crypto regulation, a judge ruled XRP is not a security, but Ripple's activities were not entirely legal.

A federal judge ruled the XRP crypto token (XRPUSD) is not a security, however, XRP promoter Ripple Lab's $728.9 million in XRP sales to institutional customers constituted an illegal securities offering.Experts say the much-awaited decision in the U.S. Securities and Exchange Commission's case against Ripple may further complicate crypto regulation going forward.

At the heart of the lawsuit filed by the (SEC) against Ripple Labs was the question of whether the XRP token is a security and whether its sale was an unregistered offering in violation of securities laws. The SEC alleged the fintech sold $1.3 billion in unregistered securities to investors.

U.S. District Court Judge Analisa Torres ruled XRP itself is not an investment that «embodies the Howey requirements of an investment contract.» The Howey Test is the standard test to check whether a financial product is a security.

Some other distributions of XRP were deemed to not be securities offerings. For example, XRP had also been algorithmically sold on exchanges to unknown buyers and used as compensation for employees and other parties.

XRP price jumped about 56% after the order.

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While some may cheer the decision regarding the XRP token, Judge Torres' decision was a mixed bag for both parties. While the SEC may have lost some ground over XRP not being considered a security, Ripple's $728.9 million in XRP sales to institutional investors constituted an unregistered securities offering.

This number is lower than the $1.3 billion in SEC's original complaint to accommodate for algorithmic