Yigit Taha OZTURK 
In a major development for the cryptocurrency industry, Ripple Labs has secured a significant legal victory. U.S. District Judge Analisa Torres ruled that XRP is not considered a security when sold on secondary markets. The ruling comes as part of the ongoing lawsuit brought by the U.S. Securities and Exchange Commission (SEC), which alleged that Ripple conducted an unregistered securities offering by selling its XRP tokens.
The decision carries broad implications for the crypto sector and has the potential to set a precedent for future token classification lawsuits.
Institutional vs. Programmatic Sales: Court’s Distinction
The court made a clear distinction between institutional sales and programmatic (secondary market) sales of XRP. Judge Torres ruled that Ripple’s direct sales of XRP to institutional investors, totaling $728 million, did constitute an unregistered securities offering under U.S. law. However, the programmatic sales, which include transactions made by retail investors on crypto exchanges, were not deemed securities transactions.
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The court found that most retail buyers of XRP on exchanges were not investing directly in Ripple and were not expecting profits based on Ripple’s efforts, failing to meet the criteria for an investment contract under the Howey Test.
XRP Token Is Not a Security Itself
Judge Torres emphasized that XRP itself is not a security. She stated, “As a digital token, XRP is not in and of itself a ‘contract, transaction, or scheme’ that embodies the requirements of an investment contract under the Howey test.”
The court instead focused on the specific transactions and schemes involving the sale and distribution of XRP, rather than the token as an asset.
Will the SEC Appeal?
Although Ripple has won a crucial decision, the legal battle may not be over. The SEC is expected to appeal the ruling. If an appeal is filed, the case would move to the Second Circuit Court of Appeals, where both parties would present arguments and evidence for further review.
An appeal could result in either a reversal or further clarification of the legal standards applied to digital assets. If conflicting rulings emerge from different appellate courts, the case could ultimately be brought before the United States Supreme Court.
Impact on the Crypto Industry
This ruling is seen as positive news for the broader crypto community, particularly as the SEC has recently taken legal action against major exchanges like Coinbase and Binance, partly for allegedly offering unregistered securities. Legal experts suggest that the Ripple ruling could weaken some of the SEC’s arguments in these cases.
The decision also provides much-needed clarity regarding the regulatory framework surrounding digital assets, potentially offering relief to the crypto industry from mounting regulatory pressure. Analysts believe this ruling could boost investor confidence and shape future legal interpretations of how digital assets are classified.
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