The judge issued a ruling stating that the Howey test criteria are clear, but when it comes to XRP, “the nature of the contract, transaction, or system need not be a security.” The judge granted parts of the summary judgment motions filed by both parties (SEC and Ripple Labs) and denied other parts.
The ruling states that the court cannot conclude that the classification of XRP as a security is legally necessary and that there are genuine disputes regarding the material facts as to whether XRP is a security.
The court also noted that the Howey test should be applied to the specific context of XRP transactions and that the parties have presented conflicting evidence regarding relevant factors. The judge acknowledged the distinction between programmatic sales and institutional sales. In his ruling, the judge pointed out that while institutional sales may be considered securities transactions, programmatic sales and employee distributions fall outside of this classification.
Judge Torres further stated, “Since 2017, Ripple’s programmatic sales accounted for less than 1% of XRP’s global trading volume. Thus, the vast majority of individuals who bought XRP from digital asset exchanges did not invest in Ripple at all. The institutional buyer bought XRP directly from Ripple pursuant to a contract, but the economic reality is that the programmatic buyer and the non-knowing secondary buyer stand in the same position.”
Torres added, “Therefore, considering the economic reality and the totality of the circumstances, the court concludes that Ripple’s programmatic sales of XRP do not constitute offers or sales of investment contracts.”
Following the court’s decision, XRP supporters celebrated the ruling, and the price of XRP rose by approximately 90% against the U.S. dollar after the announcement. While everyone rejoiced at Torres’ decision, it is likely that this case will continue.