The Ripple ruling implies securities laws protect only sophisticated investors, the opposite of the US stock market's rule, and seems likely to work out poorly
Crypto tokens are securities unless you are anonymously dumping them on retail investors. LinkedIn: Kelvin Low . Twitter: @smdiehl , @matt_levine , @exlawyernft , @ben_mckenzie , @mcuban , @panekkkk , @matt_levine , and @billhughesdc LinkedIn: Kelvin Low : Matt Levine rains in Ripple's half-victory parade. — Writing for Bloomberg and using Meta as a counter-example, let's start with a brief explanation of why the current rules exist: … Twitter: Stephen Diehl / @smdiehl : This is a good article. I am as perplexed as Matt about this one. This case is such a complete inversion of our investing norms. Matt Levine / @matt_levine : @_Jack_Alderson i don't really think this is true? the securities laws define “securities.” there are different sorts of securities transactions (some public offerings, some not, etc.), but the underlying thing is a security or it isn't or, possibly, there is a third thing. @exlawyernft : @matt_levine ... You nailed it. I think you're confused b/c of the “abstract” part. Stocks, also abstract, ARE securities b/c they are specifically defined as such under 15 USC 77b(a)(1). Whether the thing subject to the investment contract is tangible or intangible (abstract or not) does not... Ben McKenzie / @ben_mckenzie : A great one. The Ripple decision is...weird! 🤷♂️ Mark Cuban / @mcuban : @matt_levine Some thoughts on your piece. 1. “People” don't buy meta stock on the open market. Almost all trading is quantitative. Then funds. Individuals make up a small pct of exchange traded stocks (maybe meme stocks now skew it ) On the flip side almost all programmatic trading... Jacob Franek / @panekkkk : @BillHughesDC Seriously, it's pretty simple. Confused why you find it strange @matt_levine. - For things that are like securities but are not listed as securities in relevant acts, every sale of that thing must be analyzed according to Howey. - You can group different types of sales into... Matt Levine / @matt_levine : If this newsletter becomes the backbone of global value transfer, I expect the demand for Money Stuff to be considerable. https://www.bloomberg.com/... @billhughesdc : Matt Levine is brilliant so I don't get why he doesn't seem to get the difference under securities law between an asset and the transaction through which that asset is offered. The question in SEC v. Ripple was whether the transactions were securities offerings, not whether the... [image] Expand More For Next Unexpand More For Next
BloombergMatt Levine
Context & Ripple Effects
The ruling drew a line between Ripple's sales to sophisticated investors and exchange transactions, a distinction reported in the related coverage as XRP's price surged. This analysis focuses on the investor-protection tension created by that split rather than treating it as a clean victory for crypto.
The decision also became an immediate reference point for exchange defenses: Coinbase later argued that it does not trade securities in seeking dismissal of the SEC's case. That makes the ruling consequential beyond XRP, because platforms can point to the manner of sale as central to the legal characterization.
First-order effects
Ripple's institutional XRP sales were found to violate securities law, while its exchange sales were not treated as securities offers under this ruling, creating different compliance outcomes for different buyer channels.
The distinction gives crypto platforms and token issuers a near-term legal argument that anonymous exchange trading should not be assessed the same way as direct fundraising from sophisticated investors.
Second-order effects
Exchanges facing SEC claims can test the Ripple reasoning in court, as Coinbase's dismissal bid illustrates; the SEC must contend with a decision that separates token distribution methods rather than treating a token uniformly.
A market in which legal treatment turns on transaction channel can encourage issuers and platforms to favor secondary-market distribution, while leaving retail participants with weaker disclosure and recourse assumptions than in conventional securities markets.
Third-order effects
If courts sustain this channel-based distinction, crypto regulation could fragment between privately placed token sales and exchange liquidity, complicating a consistent investor-protection regime.
The longer-term pressure point is legitimacy: a system perceived as imposing stricter rules for sophisticated buyers than for retail trading may deepen the Ripple decision's split treatment of XRP sales rather than resolve the sector's regulatory uncertainty.
The trend: This is one data point in crypto's broader struggle to fit exchange-based token trading into investor-protection rules designed around conventional securities distribution.
@_Jack_Alderson i don't really think this is true? the securities laws define “securities.” there are different sorts of securities transactions (some public offerings, some not, etc.), but the underlying thing is a security or it isn't or, possibly, there is a third thing.
@matt_levine ... You nailed it. I think you're confused b/c of the “abstract” part. Stocks, also abstract, ARE securities b/c they are specifically defined as such under 15 USC 77b(a)(1). Whether the thing subject to the investment contract is tangible or intangible (abstract or …
@matt_levine Some thoughts on your piece. 1. “People” don't buy meta stock on the open market. Almost all trading is quantitative. Then funds. Individuals make up a small pct of exchange traded stocks (maybe meme stocks now skew it ) On the flip side almost all programmatic tradi…
@BillHughesDC Seriously, it's pretty simple. Confused why you find it strange @matt_levine. - For things that are like securities but are not listed as securities in relevant acts, every sale of that thing must be analyzed according to Howey. - You can group different types of sa…
If this newsletter becomes the backbone of global value transfer, I expect the demand for Money Stuff to be considerable. https://www.bloomberg.com/...
Matt Levine is brilliant so I don't get why he doesn't seem to get the difference under securities law between an asset and the transaction through which that asset is offered. The question in SEC v. Ripple was whether the transactions were securities offerings, not whether the..…
🚨 @SECGov is acting like an overzealous traffic cop arbitrarily ticketing drivers while keeping the speed limit a secret. It prefers to communicate by enforcement rather than by rules or guidance. But that's no way to regulate digital assets. I'm calling for an investigation. [im…
Coinbase will re-enable trading for XRP (XRP) on the XRP network. Do not send this asset over other networks or your funds may be lost. Transfers for this asset remain available on @Coinbase & @CoinbaseExch in the regions where trading is supported.
We said in Dec 2020 that we were on the right side of the law, and will be on the right side of history. Thankful to everyone who helped us get to today's decision - one that is for all crypto innovation in the US. More to come.
The Ripple case is a monumental development in establishing that a token is separate and distinct from an investment contract it may or may not be part of. Now, let's make it law. 👇 [image]
🚨BREAKING: Judge Torres says
's Programmatic Sales, the Other Distributions, and Larsen's and Garlinghouse's sales of #XRP do NOT constitute investment contracts. Documents and details to come.
Based on my quick read through, it looks like the only thing left for trial would be the claim that Larsen and Garlinghouse “aided and abetted” Ripple's Institutional Sales of XRP—which were the only sales the court found to violate the law.
Following Judge Torres' decision in SEC v. Ripple Labs, XRP is Schrodinger's Shitcoin: a security when sold to a VC, not a security when sold via programmatic means or by or to insiders. This is not a position the law will long tolerate
“Further, the court rejected Ripple's fair notice argument, noting that the Howey test is clear and that claiming ignorance is not a defense to violating the securities laws. We'll continue to review the decision.” Does not guarantee an appeal, but leaves door open.
“...instead emphasizing that Howey and subsequent cases have held that a variety of tangible and intangible assets can serve as the subject of an investment contract.” 2/3
SEC reaction to ruling in Ripple case: “The court agreed with the SEC that the Howey test governs the securities analysis of crypto transactions and rejected Ripple's made-up test as to what constitutes an investment contract,”...
The most important part of this ruling: “XRP, as a digital token, is not in and of itself a “contract, transaction[,] or scheme” that embodies the Howey requirements of an investment contract.” This is a now a matter of law (not up for trial.)
court also rules a “speculative motive” by the purchaser of an asset is not enough to evidence and investment contract... AND BECAUSE THEY DIDN'T KNOW THEY WERE BUYING FROM RIPPLE, THEY DID NOT DERIVE THAT EXPECTATION FROM RIPPLE'S EFFORTS honestly this seems shaky lol [image]
Institutional sales of XRP to sophisticated investors satisfy Howey...but, who cares, because that can be covered under exemptions to registration under Reg D. [image]
somehow have a feeling gary will be back to saying congress needs to act quickly with legislation to protect investors after 2 years of saying that the law was clear
Never thought I'd be so happy to see XRP ripping. This is an unqualified win for the industry, and now stands as legal precedent in the USA. Well done to the Ripple team for fighting this battle. 🫡
Honestly, you can lose a lot of faith in a lot of US institutions, but the unpoliticized components of the American Judiciary are pretty fucking solid. An analysis of securities dividing programmatic vs institutional is a master stroke and exactly how this should work!
The Ripple SJ decision is in. Here is the broad summary. Will break down further: Institutional Sales by Ripple ARE investment contracts Programmatic Sales by Ripple ARE NOT investment contracts The court chooses to NOT address secondary market sales [image]
This is is a huge win for Larsen, Garlinghouse and the XRP community. 1. While the court rules that some of Ripple's “Institutional Sales” of XRP were investment contracts and thus, the sale of unregistered securities, 2. Ripple's sales of XRP to “Programmatic Buyers”...
$XRP has officially been deemed NOT a security by a US judge. This is not only a big win for Ripple, but also the entire crypto community. Although precedent isn't strictly binding, it's a great indication that many other altcoins are also non-securities. Game on, Gensler.
It was clear from Day 1 that SEC would lose their politically motivated and rigged lawsuit against #Ripple. As $XRP is deemed NOT a security by the court, this sets precedent for all other similar cases. It's not just a huge win for XRP, but the entire crypto industry!