Ripple Not a Security, Says European Institute: What Does This Mean for SEC vs XRP

Key Takeaways

• A new study suggests XRP is a utility token.
• How tokens are classified depending on how they are distributed is at the crux of the debate.
• The XRP vs SEC court hearing should start on March 22, 2024.

The Ripple community is abuzz following yet another development that may have a notable impact on the ongoing and lengthy court battle between XRP and the United States Securities and Exchange Commission (SEC).

This is because a new study from the European Corporate Governance Insitute (ECGI) has reaffirmed that XRP is a utility token, and not a security, which falls within an American court’s ruling in July 2023 .

Clarity on XRP

The legal tussle between Ripple and the SEC has been somewhat of a spectacle given its lengthy nature. Meanwhile, its outcome has the rather significant implications for the crypto industry.

This latest study, titled “Corporate Governance Meets Data and Technology”, cites Ripple and XRP as an area of clear regulatory concern when it comes to token offerings. This is especially when it comes to  the classification of tokens following fundraising methods such as initial coin offerings (ICOs).

Despite a judge ruling last July that XRP sales on public exchanges were not securities, the SEC remains adamant they are.

However, the ruling adds a layer of complexity over the status of XRP when sold directly to institutional investors. It is here that regulatory bodies struggle to classify tokens issued through these new methods.

Questions Remain

Legal expert Bill Morgan weighed in  on the ECGI study, commenting that XRP isn’t inherently a security. He did, however warn that people could sell XRP in a manner that constitutes it being a security.

Cryptocurrency will continue evolving in both capability and method of distribution. While the court ruling does provide some clarity for XRP, the landscape for token offerings remains unclear.

Evidently, there is a greater need for regulatory clarity in the crypto sector. This latest study, once again, highlights the complexity involved in making these classifications and distinctions.

It’s worth noting that as the technology and regulations continue to evolve, ideally side-by-side, the study and court findings may be revisited.

Is the SEC Listening?

SEC Chairman Gary Gensler holds the position that almost all cryptocurrencies are securities. As a result, he argues, they fall under the regulator’s jurisdiction.

Despite this, and plenty more evidence contrary to the SEC’s long-held stance on what classifies as a security – based on the Howey Test – the securities watchdog is adamant about winning this case. This is because it would not only represent yet another defeat in crypto court for the SEC, but would also mean it would have to acknowledge that XRP is not a security.

On March 22, the SEC vs Ripple case should begin with the SEC giving opening briefs on Ripple’s proposed remedies. Ripple’s opposition brief will happen on April 22, while the SEC’s reply brief will be two weeks later on May 6.