The stock of crypto trading platform Coinbase Global surged more than 10% on Thursday following a federal judge’s ruling that a crypto token does not meet the definition of a security.
The ruling came in a significant case between the Securities and Exchange Commission (SEC) and Ripple Labs, the company behind the XRP token. The SEC has argued that XRP tokens are securities that Ripple failed to register, while Ripple maintained that the tokens do not meet this legal standard.
The U.S. District Court for the Southern District of New York delivered a partial victory for both parties. The judge determined that tokens sold by Ripple to institutional buyers, as specified in written contracts, did meet the securities test. However, tokens sold to the general public on digital-assets exchanges through trading algorithms did not meet the test. The judge emphasized that it was the nature of the transaction itself, rather than the token, that determined its status under the law.
This ruling could have significant implications for crypto investors and companies like Coinbase (ticker: COIN), as it suggests that many tokens sold in the secondary market may not be considered securities. This would severely limit the SEC’s ability to pursue trading platforms.
In June, the SEC filed lawsuits against Coinbase and competitor Binance, alleging that they facilitated trading of unregistered securities and should have registered with the agency.
Following the court’s decision, Coinbase has yet to provide an official comment. However, Chief Legal Officer Paul Grewal expressed his satisfaction on Twitter, stating, “Most days I love being a lawyer. Today is one of them.”
Ripple CEO Brad Garlinghouse also appeared to celebrate the ruling on Twitter, expressing gratitude to those who supported their case and suggesting that it was a victory for crypto innovation in the US.
The SEC has not responded to requests for comment at this time.
Coinbase stock experienced a 10.4% increase, reaching $94.98 by midday Thursday, in response to the court’s decision.
The prices of XRP rose approximately 28%, while other alternative coins like Solana and Cardano saw increases of more than 9%.