Ripple Ruling Split XRP Sales Under Securities Law

A federal judge divided Ripple Labs’ XRP transactions into legally different categories on July 13, 2023, finding that direct institutional sales were unregistered offers and sales of investment contracts while Ripple’s programmatic exchange sales did not satisfy the same test on the evidentiary record.

Judge Analisa Torres of the U.S. District Court for the Southern District of New York granted parts of both sides’ summary-judgment motions. The result was a material defeat for the Securities and Exchange Commission’s attempt to treat Ripple’s varied XRP distributions as one continuous securities offering, but it was not a blanket declaration that every XRP transaction fell outside securities law.

The transaction determined the result

The court applied the investment-contract test derived from SEC v. W.J. Howey Co., examining whether a transaction involved an investment of money in a common enterprise with a reasonable expectation of profits derived from others’ efforts.

For Ripple’s institutional sales under written contracts, the court found all three elements satisfied. Institutional buyers supplied capital, Ripple pooled proceeds and the surrounding contracts and communications supported an expectation that Ripple would use the money to develop the XRP ecosystem. The SEC alleged that these sales totaled approximately $728.9 million from 2013 through 2020; the order noted that the parties disputed some dollar amounts and details.

Programmatic sales produced a different conclusion. The SEC alleged that Ripple sold approximately $757.6 million of XRP through trading algorithms on digital-asset exchanges. These were blind bid-and-ask transactions: Ripple did not know the buyers’ identities, and buyers did not know whether Ripple or another holder was selling.

Torres concluded that the undisputed record did not establish the expectation-of-profits element for those transactions. The court emphasized that XRP, considered only as a digital token, did not itself embody an investment contract. Instead, the legal analysis depended on the contracts, expectations and economic circumstances surrounding each sale.

What the order did not decide

The distinction was narrower than claims that XRP had categorically been declared “not a security.” In a footnote, Torres expressly declined to decide whether secondary-market XRP sales constituted offers or sales of investment contracts because that question was not properly before the court. Such a determination would depend on the circumstances of a particular transaction or scheme.

The court also ruled for the defendants on other XRP distributions because recipients had not provided money or other tangible consideration to Ripple. Programmatic sales by executives Christian Larsen and Bradley Garlinghouse likewise did not satisfy the expectation-of-profits element on the record.

The litigation was not finished. A factual dispute remained over whether Larsen and Garlinghouse knowingly or recklessly assisted Ripple’s institutional-sales violations, leaving those claims for trial. The court also rejected Ripple’s fair-notice defense concerning the institutional transactions.

Markets reacted before the case was resolved

XRP’s quoted value was 75% higher by late afternoon on July 13, according to Refinitiv Eikon data cited contemporaneously by Reuters. That measurement did not identify a trading pair, venue, exact observation time or official close. Cryptocurrency trades continuously across exchanges, so the figure is an indicative feed observation rather than a universal daily return.

Market access changed as well. Coinbase’s first-party support record states that it relisted XRP at 5:35 p.m. Eastern on July 13, subject to product and geographic restrictions. Kraken separately restored funding and trading for eligible U.S. residents. Those exchange decisions showed how quickly firms interpreted the programmatic-sales holding, but they were commercial risk decisions—not regulatory approval or an extension of the ruling to every secondary trade.

The event-day conclusion was therefore consequential but limited: the same token could appear in transactions producing different securities-law outcomes, and the court’s analysis turned on economic reality rather than the token’s label alone.