“Following Thursday’s bombshell split decision by judge Analisa Torres of the Southern District of New York in SEC v. Ripple Labs et al., the answer appears to be that XRP is both an unlawfully sold investment contract when sold to VCs or institutional buyers, but a perfectly lawful, “something else” when sold anonymously via cryptocurrency exchanges, or distributed to employees or by insiders.

The only thing this ruling guarantees for cryptocurrency issuers, then, is continued uncertainty in the cryptocurrency markets – uncertainty which Congress, and only Congress, can step in to correct…

The legal status of XRP, then, seems to possess a kind of quantized duality, Schrodinger’s Shitcoin – it’s a security when sold to an institutional investor in a primary sale, but not a security when sold behind the anonymity of a cryptocurrency exchange, or when sold in exchange for services to insiders.”

Analyst Comment: This is a continuation of the US crackdown on crypto. The crackdown is coming from multiple fronts. SEC is targeting crypto exchanges and projects for securities violations. The Biden admin is working to develop new regulatory frameworks for crypto. Crypto miners are coming under more scrutiny from environmental groups for their alleged “climate impact.” The IRS is targeting individual crypto investors for capital gains taxes. And finally, institutional investors are getting into the crypto game, either for a quick pump or dump or a hostile takeover of the infrastructure to turn the wild west of crypto into a controlled system. While the results of this ruling are mixed, the trend is negative and we expect increasing pressure on crypto over the next 5+ years.