Ripple Labs ruling implies a ‘good outcome’ for Coinbase, other exchanges: Analyst
A judge has ruled that Ripple Labs’ XRP token can, in some cases, be treated as a security. JMP Securities Director of Financial Technology Research Devin Ryan tells Yahoo Finance Live why the ruling could “help accelerate” the push to get crypto legislation ad what it means for Coinbase and other exchanges.
– In a shock ruling last week, Judge Analisa Torres found Ripple Labs had not violated SEC rules by selling its XRP token on public exchanges. The decision throws a lot of US crypto token regulation into disarray as investors try to understand how future cases might be settled. A Ripple Labs CEO came out saying that the SEC has, quote, “sowed confusion in the market and really been a bully, going after weak players who couldn’t mount proper defenses.”
We’re joined now by Devin Ryan, director of financial technology research at JMP Securities, a citizen’s company. So let me just ask you. At first blush, this seems like a huge win for Ripple customers, at least people who own the tokens. I dive into the ruling. And it looks like sales on the secondary market are a little bit cloudy. There just maybe highlight for some of the people in the audience here what the various facets of this ruling mean.
DEVIN RYAN: Hey, good morning, Jared. I think the biggest thing that we took away from the ruling is really around XRP, the token. And our understanding from reading the summary judgment was that the token itself is not the security, which I think has very important read through to the rest of the industry. But then the other piece of it is that depending on how the token is sold, that will deem whether it’s a security not.
So on one hand, the institutional sales to institutions were deemed as securities transactions. And that piece of the case is going to go to trial. And then the retail transactions and the trading on exchanges, my interpretation is that it is not deemed a securities transaction.
So if you think about the implication for firms like Coinbase or others in the industry that run exchanges, I think this is a very good outcome. But this is just one piece of the puzzle. You know, this doesn’t end other regulatory actions that are happening concurrent to the Ripple case. And so we’ll have to continue to follow from here, but definitely a win, as you mentioned.
Yeah. Well, let me ask you about other court cases that are pending right now. There’s been a huge crackdown on crypto in general. Gary Gensler, head of the chair of the Securities and Exchange Commission, is on record saying that everything, except Bitcoin, may be a security that needs to be registered. Well, that’s a pretty blanket statement right there. How does this ruling affect or maybe put some shade on those statements by Chair Gensler?
Yeah. Well, I think what the industry is looking for is clarity here. And there’s been a lack of clarity. And so there’s statements made by regulators. But then there’s actions that seem to go against some of those statements.
And you mentioned legislative action. That would probably be the clearest because then you have the intent of the representatives in Congress who represent the American people making the case, instead of trying to figure– reinterpret decades-old securities laws. Is there a chance that we see any kind of incremental regulation on the crypto front from Congress? Or do we have to wait for the SEC and these other agencies that have been very slow to give guidance to finally give that guidance?
Yeah. I think that’s the hope that Congress is already looking at certain legislation. And there’s been some that have been progressing. And so I think the hope here is that we get action on that over the next year or so. And some of that is potentially going to accelerate just on the heels of this ruling, which adds kind of more of a legal framework from the courts around how they’re thinking about it.
Well, let me ask you then. We have just under a minute to go. Anything we haven’t covered here, anything that you’d like to highlight that think could drive either a tailwinds or headwinds for these crypto, tokens, stocks, anything in there?
Yeah. I think one of the biggest things is institutional adoption. I know that’s something that people have been talking about for years. But we really haven’t seen it in kind of a traditional way. And the reason being is because institutions acting as fiduciaries for their customers really need to have clarity around regulation.
I agree there. After two years of a crypto winter, obviously, attention on the space is a little bit down. But you have to think that if it’s still around and given the billions of dollars of prior investment, that it’s here to stay here, at least for a little while. I appreciate your insights, Devin Ryan, director of financial technology research at JMP Securities, a citizens company.