Last week, XRP's price jumped 70% after a judge refused to recognise token trading on cryptocurrency exchanges as securities transactions. US platforms immediately announced the return of XRP trading pairs. Soon after, altcoins that the US Securities and Exchange Commission (SEC) had previously called securities recovered their June losses.
Demand for XRP trading has been so strong these days that some cryptocurrency exchanges have found it difficult to conduct transactions, and the token is still leading by a wide margin in terms of liquidated positions per day.
At the same time, industry experts point to clear contradictions in the court ruling and the risk of it being overturned on appeal. It's all about the dual approach to determining the status of XRP, which, according to the judge, is a security when sold to institutional investors and isn't one when sold to retail investors.
John Reed Stark, who chaired the SEC Office of Internet Enforcement for 11 years, criticised the court ruling: "Securities laws were specifically designed to protect individual investors, based on the idea that they can't fend for themselves... The Ripple decision turns this notion on its head."
As Stark explains, institutional investors can count on the SEC's legal protection when buying a token. If the issuer violates the rules, it faces fines of up to and including cancellation of its licence. If individual investors purchase the same token, the issuer isn't liable for financial wrongdoing.
Moreover, the court's designation of 'programmatic sales' as a separate asset subclass will lead to the emergence and spread of sub-tokens on unregulated crypto platforms. Investors will find themselves defenceless. For this reason, the SEC is obliged to appeal, Stark believes.
Attorney Bryan Jacoutot agrees with Stark but also suggests keeping an eye on the upcoming trial regarding the illegal sale of nearly $1 billion worth of tokens to institutional investors. Because XRP is treated as a security in this case, Ripple faces federal law violation charges and multi-million dollar fines.
Ripple investors shouldn't celebrate this early and should be cautious in their investment decisions. The SEC appeal and the hearing of the 'XRP sale to institutional investors' case could hurt the coin's value.
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)
