What happened
An investor could hardly pick a better trading stretch than the past few days to be invested in some of the market's top altcoins. Following a very impactful -- and very favorable -- court ruling for XRP (XRP +0.23%) developer Ripple Labs, many of these cryptocurrencies rocketed higher.
XRP was, understandably, among the leaders; according to data compiled by S&P Global Market Intelligence it was up by almost 63% week to date as of early Friday morning. Others weren't far behind, with the XRP-like Stellar (XLM +4.14%) up 50% and Solana (SOL -0.94%) cruising more than 37% skyward.
So what
The major catalyst during the week was Ripple Labs' largely successful defense in a high-stakes lawsuit brought by the Securities and Exchange Commission (SEC) in late 2020. The government agency has been claiming for some time that many cryptocurrencies qualify as securities, similar to stocks or bonds, and therefore fall under its purview. This lawsuit is being seen as a model case for that regulatory status.
This is why the prices of many vaulted well higher after U.S. District Court judge Analisa Torres ruled that only the institutional sales of XRP violated U.S. investor protection laws. Sales via cryptocurrency exchanges did not. The ruling supports the assertion of Ripple Labs, not to mention many other crypto developers and enthusiasts, that XRP and its ilk are not, in fact, securities.
CRYPTO: XRP
Key Data Points
Since precedent is important in American law, this case -- assuming its ruling isn't overturned on appeal -- should provide a legal foundation for cryptocurrencies to be regulated as, well, currencies. In that case they won't be required to be registered with the SEC, which many crypto investors see as a body hostile to that asset class.
That's why Ripple Labs and many advocates for digital money are considering that the split decision in the case was tantamount to a victory.
In a tweet, Ripple Labs Chief Legal Officer Stuart Alderoty wrote:
A huge win today -- as a matter of law -- XRP is not a security. Also a matter of law -- sales on exchanges are not securities. Sales by executives are not securities. Other XRP distributions -- to developers, to charities, to employees are not securities.
Now what
The tussle between regulators who aren't warm to cryptocurrencies (the SEC being the No. 1 example) and developers certainly isn't over, but this crucial early fight has to be awarded to the latter. If the ruling holds and the general crypto world ends up benefiting, it will be a lasting victory that helps legitimize digital coins and tokens. It is also certain to make them more popular as investments.
