Federal Judge Rejects SEC Case, Rules Cryptocurrency Token Not a Security
In an update to our earlier coverage over the ongoing efforts of the SEC to regulate aspects of the cryptocurrency market, a Southern District of New York judge recently ruled that a token offered on public exchanges did not violate federal securities law because the token was “not necessarily a security on its face.” Specifically, the company Ripple Labs did not violate the law when it offered XRP, a crypto token of the Ripple network, news of which sent the value of XRP up over 70% the date of the opinion. Although it is being heralded by many in the industry as a victory, the judge did rule that the company’s sale to certain entities, such as hedge funds and other sophisticated buyer, did violate securities law, allowing the SEC to maintain some of their arguments for regulation going forward. While other cryptocurrency firms will likely point to the decision as precedent in any battles over regulation and jurisdiction of the SEC, the mixed ruling may only breed further confusion over how the United States views, regulates and prosecutes cryptocurrency firms.
Prominent House Republican Celebrates Judge’s Ruling
Representative Tom Emmer, the Majority Whip, took to twitter to lend support for the ruling that found that, “a token is separate and distinct from an investment contract it may or may not be part of” and went on to say, “Now, lets make it law.” The congressman, sometimes referred to as the “Crypto King of Congress” has introduced several pieces of legislation in relation to cryptocurrency, including a bill that would make it clear what constitutes a security for regulation and would likely lead to less regulation enforcement against crypto firms. However the bill, along with several other bills relating to cryptocurrency regulation, has not been voted on, leaving regulators and those in the industry in the dark over the legality of some offerings.
