Following the news that Ripple Labs has won a case against the US Securities and Exchange Commission (SEC);

Nicklas Nilsson, Thematic Intelligence Consultant at GlobalData, offers his view:

“The US judge ruled that the open market sales of XRP, Ripple’s cryptocurrency developed for cross-border payments, do not classify as a security. The ruling will have implications for other enforcement actions undertaken by the SEC and for crypto regulation in the US. It provides a strong precedent for other cryptocurrencies to be deemed non-securities. It also suggests that traditional financial regulations, like those governing trading in stocks and bonds, may not appropriately apply to crypto.

“That sales of XRP to retail investors through exchanges are not unregistered securities should mean that the SEC’s case against Coinbase is largely dead in the water, and that most cryptocurrencies named in the complaint are non-securities. Although each case will be evaluated individually, Ripple’s win shows that the SEC’s hardline stance, categorizing most digital assets as securities, can be successfully challenged.

“The ruling also puts a spotlight on the numerous enforcement actions taken by the SEC against crypto since the start of the year. There has been a growing sense that the SEC would lose this case, especially towards the end of last year. The question then becomes; did the SEC think they would lose, and if so, has recent enforcement action been an attempt to muddle the water, hoping to get a few high-profile wins before the Ripple ruling?

“However, like most things involving crypto, the ruling was not completely clear-cut. The court ruled that direct sales of XRP to institutional investors were sales of unregistered securities. This could change the funding landscape for crypto projects. Traditionally, they have relied on early sales to institutional investors and venture capitalists to get off the ground. But now, such pre-funding might be done for.

“There are also many uncertainties. The ruling might be reversed on appeal. No one would be surprised if the rulings eventually reach the Supreme Court. The SEC might also argue that the decision was based on how well retail investors understood crypto years ago when the industry was much smaller than it is today. One thing, however, is crystal clear; Congress needs to step in to clarify the status of digital assets in the US.”