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The crypto bulls are out in full force today after the US judicial system practically demonstrated its readiness to check regulatory activism, dealing a fatal blow to the SEC's dream of bringing the entire crypto sphere under its ambit. While today's ruling is an obvious win for Ripple, it also unleashes positive ramifications for the ongoing litigation between Coinbase and the SEC.

The ruling that XRP is not itself an investment contract is a significant blow to the SEC's case against @Coinbase and the other crypto exchanges.

While Judge Torres' decision is not "binding precedent" it is extremely well reasoned and will be cited in all motions to dismiss. https://t.co/FWSYgO8x3q

— MetaLawMan (@MetaLawMan) July 13, 2023

Today's non-binding ruling has set an important precedent for crypto-related litigation going forward. Our readers can access the entire judgement here. For those who might be unaware, the SEC had alleged that Ripple's XRP token was a security and that the company's periodic release of XRP via institutional and programmatic sales to fund its operations constituted a violation of the securities law.

1/5

Ripple case, here is the good and the bad.

But it is mostly *VERY* good for all alts, and a surprisingly big win for XRP.

First Judge did decide institutional sales/fundraising was securities. pic.twitter.com/esmjcIrzN0

— Adam Cochran (adamscochran.eth) (@adamscochran) July 13, 2023

In the US, the Howey test is used to determine whether an economic transaction constitutes the sale/purchase of a security. The test establishes three requirements for an investment to be deemed a security:

Investment of moneyIn a common enterpriseWith a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.

The judge, Analisa Torres, ruled today that the sale of XRP tokens did not meet the third requirement of the Howey test. The judge contended that while institutional buyers of XRP could have expected to make a profit on their investment, such a motive could not be pinned on programmatic buyers. Also, in a critical piece of insight, the judge ruled that speculation on Ripple's XRP token was not a sufficient basis to establish the existence of an investment contract.

To summarize, today's judgement is based on the following key findings:

The sale of tokens to institutions does constitute an investment contractProgrammatic sale of tokens on exchanges does not meet the requirements of the Howey Test.Ripple has a centralized structure and formal token distribution plans. If these do not fall under the ambit of the securities law, almost no other token sold via exchanges will clear the Howey Test.

So big. If listing XRP on exchanges doesn't make it a security, the SEC's case against Coinbase is toast. https://t.co/6GjgpdVuuL

— steven aguiar (@ricenbeats0x) July 13, 2023

Of course, as we noted in a previous post, the SEC has filed a lawsuit against Coinbase, accusing the crypto exchange of operating an "unregistered national securities exchange, broker, and clearing agency." In light of today's judgement, the SEC's case against Coinbase has a very remote possibility of passing judicial scrutiny. What's more, if the sale of the XRP token via exchanges can't be considered a security, Bitcoin and Ethereum are most likely to be in the clear. Today's judgement has dealt a fatal blow to the SEC's penchant for regulation via arbitrary enforcement actions. It also nullifies the assertion of the SEC Chair, Gary Gensler, who recently said that everything other than Bitcoin was a security.

Judge: Ripple’s sale of $XRP does not constitute an offer of investment contracts

It's time we regulate cryptocurrencies as cryptocurrencies, not as securities (aka stocks) governed by legislation written almost 100 years ago pic.twitter.com/2eAild85Yf

— Julian Klymochko (@JulianKlymochko) July 13, 2023

It is hardly a surprise, therefore, that the price of Ripple's XRP token has shot higher today. Coinbase shares and Bitcoin also appear to be on a stronger footing.