The U.S. cryptocurrency regulation landscape has faced further uncertainty as diverging judicial opinions about the classification of cryptocurrencies as securities have emerged. This has raised concerns for Ripple and its digital asset XRP. However, Ripple Labs’ Chief Legal Officer (CLO), Stuart Alderoty, remains confident that a recent ruling against Terraform Labs has no impact on the Ripple case.
The controversy around this issue started when U.S. District Judge Jed Rakoff approved the Securities and Exchange Commission’s (SEC) case against Terraform Labs, challenging the precedent set by Judge Analisa Torres in the Ripple case. Judge Rakoff rejected the distinction made in the ruling between public and institutional sales, leading to speculation about the potential implications for cryptocurrencies.
Amidst the speculation, Stuart Alderoty issued a statement, dismissing any concerns and asserting that the ruling in the Terraform Labs case does not change the previous ruling that XRP is not a security. He emphasized that the Ripple ruling was based on a comprehensive factual record developed over a period of more than two years.
Alderoty also mentioned that the Terraform Labs case is still in its early stages and the presiding judge currently has to accept all SEC allegations as true. He hinted at a misinterpretation of Judge Torres’ reasoning by Judge Rakoff. Alderoty indicated that secondary market traders cannot invest money in something or someone if they are unaware of who they are buying from, which he believes the judge overlooked.
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Neil Hartner, Ripple’s senior staff software engineer, supported Alderoty’s stance by stating that if the SEC can prove their claim that Terraform Labs knowingly made promises to purchasers, it could satisfy the Howey Test. However, the judge has not yet ruled on whether this claim has been proven, only that the case holds merit if it can be proven.
The Ripple case was seen as a significant moment for crypto regulation, as Judge Torres ruled that XRP was not a security when sold to the general public on secondary markets but was considered a security when sold directly to institutional investors. This decision was based on the Howey Test, which determines whether an investment qualifies as a security. Judge Torres concluded that institutional sales of XRP fell under this test, while public sales did not.
The recent ruling in the Terraform Labs case has reopened the debate on crypto regulation and the application of the Howey Test. However, as pointed out by Ripple’s CLO and senior software engineer, the Terraform Labs case is still in its early stages, with no solid evidence presented yet.
At the time of writing, the price of XRP was $0.69. XRP continues to consolidate after the rally following the SEC decision. It is crucial for the price to hold the 23.6% Fibonacci retracement level at $0.685 to push towards $1. Otherwise, a decline to $0.64 seems likely.
The controversy surrounding the classification of cryptocurrencies as securities highlights the ongoing challenges in the U.S. crypto regulation landscape. The diverging judicial opinions and uncertainty indicate the need for clear and consistent regulations to provide stability and confidence for market participants.
In conclusion, despite the diverging judicial opinions and the recent ruling against Terraform Labs, Ripple’s CLO remains confident that it has no bearing on the Ripple case. The Ripple case was a significant moment in crypto regulation and provided optimism for the industry. However, the Terraform Labs case has reopened the debate on crypto regulation. The situation calls for clear and consistent regulations to provide clarity and stability for market participants.
