Federal Judge Rejects Ruling That Decided XRP Security Status

United States District Judge Jed Rakoff, who is presiding over the case filed by the Securities and Exchange Commission (SEC) against Terraform Labs and Do Kwon, has just rejected a vital aspect that gave Ripple and XRP a victory against the securities regulator.

This decision contradicts the U.S. District Judge Analisa Torres’s verdict, which determines the securities status of tokens based on how they were sold.

Read Also: Ripple Attorney Withdraws from XRP Lawsuit. Here’s why

Judge Rakoff chose not to differentiate digital assets based on how they are sold in his judgment. Instead, he said whether tokens are sold to large, institutional investors or through secondary market transactions to retail investors, should not be used to determine the securities status of digital assets.

The new development was shared on Twitter by Ally Versprille, a reporter covering crypto regulation for Bloomberg Business.

Versprille tweeted, “Judge presiding over SEC/Terraform Labs case in new court filing rejects approach taken in Ripple ruling. Says he won’t distinguish between crypto assets based on how they’re sold – i.e. directly to institutional investors versus to retail investors on exchanges.”

The effect of the legal verdict is becoming obvious in the crypto and a section of the stock market. After the news broke out, Coinbase shares (COIN) immediately dipped 3%, while the price of XRP retraced by about 2%. However, it still maintains the intraday low of $0.69.

Read Also: XRP Lawsuit: SEC Chair Unpleased with XRP Non-Security Status for Retail Investors

Should Ripple and XRP Worry?

It’s worth noting that Rakoff’s decision still has relatively nothing to do with Ripple and XRP, at least for now, until when the SEC decides to finally file the widely discussed appeal.

Obviously, Rakoff’s verdict is another pointer to how digital assets should be classified under United States security laws. It shows that the ruling prioritizes the properties of a digital token over its mode of distribution, which could strengthen the SEC’s case against Ripple if the regulator chooses to appeal Judge Torres’s verdict.

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