2023-07-14 17:10:27
Should digital currencies be treated like securities? The American stock exchange regulators SEC and CFTC have been arguing with the crypto industry about this question for years. Now there is a judgment by District Judge Analise Torres in New York, and that’s a tough one: According to this, the cryptocurrency Ripple is basically not a security. This ended a year-long legal battle between the crypto company Ripple and the SEC.
The Securities and Exchange Commission had accused the company of intentionally deceiving investors in Ripple by selling more than $1 billion worth of tokens without registering them as securities. As a result, investors were deprived of information about the cryptocurrency and Ripple’s business. This week’s decision lets many companies behind cryptocurrencies breathe a sigh of relief, the verdict is seen as groundbreaking for the entire sector.
It states as a precedent that cryptocurrencies do not meet the so-called Howey criteria for a security – with one exception: If Ripple is bought by institutional investors, the Howey criteria apply. This means that in this case, an investment agreement has been entered into with Ripple and the purchase falls under securities laws. The SEC is then responsible as the supervisory authority for trading.
Ripple at its highest level in more than a year
According to the judge, this does not apply to programmatic investors, i.e. to the general public. However, a district court ruling is not automatically binding in other parts of the country, and the SEC can still appeal.
The Howey criteria were defined after a 1946 case before the US Supreme Court. According to this, every transaction should be classified as a security if the profit arises exclusively from the work of the company and the efforts of third parties.
Franz Nestler Published/Updated: , Recommendations: 6 A comment by Franz Nestler Published/Updated: , Recommendations: 10 Winand von Petersdorff, Washington Published/Updated: , Recommendations: 15
The reaction on the market was not long in coming. Immediately after the verdict was announced, Ripple’s value shot up – currently with an increase of about 65 percent compared to the previous day. The digital currency was trading at around 77 cents as of Friday afternoon, its highest level in more than a year. Other crypto currencies also benefited from the positive judgment for the entire crypto sector.
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