Litigation

Partner and co-chair of Herrick's Securities Litigation and Enforcement Group, Arthur G. Jakoby, spoke with Law360 about the how the cryptocurrency industry will be affected by the milestone ruling a New York federal judge made in the U.S. Securities and Exchange Commission's ("SEC") case against Ripple Labs. 

The article notes that Judge Analisa Torres sided with the SEC's assertion that Ripple's institutional sales of its XRP token to "sophisticated individuals and entities" was an unregistered sale of securities. But Judge Torres agreed with Ripple that "programmatic sales" of the token "did not constitute the offer and sale of investment contracts."

The article highlighted that prior to Thursday's (July 13, 2023) decision, proponents of the cryptocurrency industry sounded the alarm on the what the case's implications might be for secondary trading. Additionally, a multitude of industry groups had filed amicus briefs urging the court to recognize that XRP's sales on secondary markets do not constitute a securities transaction. That issue is at the heart of multiple cases the SEC has brought against crypto exchanges alleging they listed unregistered securities and therefore operated as an unregistered securities exchange.

Arthur called the decision a huge win for the industry amid those open questions. "The court's precedent-setting decision that programmatic sales of XRP do not constitute the sale of securities, undercuts the SEC's position that secondary sales of digital assets on exchanges such as Coinbase, and other digital asset platforms, constitute the sale of unregistered securities," Arthur continued. 

"If upheld on appeal, this decision significantly narrows the SEC's jurisdiction over the crypto market," Arthur concluded.

Read the full article in Law360 here. Access may require a subscription.