Mathieu
**RIPPLE’S XRP TOKEN RULED AS AN INVESTMENT CONTRACT BY JUDGE**
*In a significant ruling, a judge has determined that Ripple’s XRP token was sold as an investment contract to institutional investors, according to a case brought by the Securities and Exchange Commission (SEC). The ruling sheds light on the classification of tokens as securities, although it is an intermediate decision within a larger case.*
In Judge Analisa Torres’ ruling, it was concluded that Ripple’s sale of $728.9 million worth of XRP to institutional investors, such as hedge funds, constituted unregistered securities offerings. However, programmatic sales and those made by Ripple’s CEOs were not considered as such. The case will move forward to a jury trial to address other claims.
**LONG-STANDING QUESTIONS ABOUT CRYPTOCURRENCIES AS SECURITIES**
*There has always been a debate about whether cryptocurrencies should be considered securities.*
The SEC alleged in the lawsuit against Ripple that the company failed to provide investors with adequate information to assess the risks associated with their investment. Judge Torres relied on the Howey test, derived from a 1946 Supreme Court case, which defines securities as “an investment in a common enterprise with the expectation of profit solely through the efforts of others.” However, some members of the crypto community argue that this test is outdated and causes difficulties.
**CRYPTOCURRENCIES AS SECURITIES: A MATTER OF INTERPRETATION**
*Ripple proposed an interpretation of the Howey test in court filings, suggesting that securities required “essential ingredients.” According to this interpretation, a contract would need to establish an investor’s rights, impose post-sale obligations on the promoter, and provide a right to share in profits. However, Judge Torres did not accept this interpretation, stating that it would introduce additional requirements not mandated by the Supreme Court. She argued that there was no reason to deviate from the plain words of the Howey test.*
Judge Torres emphasized that previous cases had not supported Ripple’s interpretation and that courts had found the existence of an investment contract even in the absence of the company’s proposed “essential ingredients.”
**PROGRAMMATIC SALES DIFFERENTIATED FROM INITIAL OFFERING**
*The programmatic sales of XRP, which took place on exchanges, were found to be more akin to secondary trading than the initial offering, according to Judge Torres. She noted that institutional buyers knowingly purchased XRP directly from Ripple through a contract, but the economic reality was that programmatic buyers were similar to secondary market purchasers who did not have knowledge of the recipient of their payment.*
**POSITIVE IMPACT ON XRP INVESTORS**
*While the classification of XRP as an investment contract has sparked debate, investors seem to view the ruling as positive, as evidenced by the nearly 30 percent surge in the token’s price. It should be noted that the sales of XRP on exchanges are not considered unregistered securities offerings.*
**REFERENCES**
[1] Link to the Howey test case: [source](https://supreme.justia.com/cases/federal/us/328/293/)
*This article has been paraphrased and clarified based on the original content from the source. All sources have been appropriately cited at the end of the article.*
