News & Analyses

XRP price drops 2% while Ripple CLO says SEC has strayed far from “Howey”

  • XRP price plummeted below the psychologically important $0.60 level on Tuesday. 
  • Ripple CLO Stuart Alderoty weighed the SEC evidence considered by Judge Analisa Torres prior to the July 13 ruling. 
  • Alderoty defends XRP token’s non-security status and backs his claims with documents from Coinbase lawsuit. 

Ripple (XRP) price slipped below the key psychological level of $0.60 on Tuesday for the first time in nearly 10 days. The altcoin posted a second consecutive day of losses as market participants and key players still debate Coinbase’s legal loss against the US Securities and Exchange Commission (SEC).

The SEC’s legal battles with Coinbase and Ripple are intertwined.  Coinbase’s defense relies on Judge Torres’ ruling about XRP, which considered that the token wasn’t a security when it was sold through exchanges. This ruling, considered at the time as a partial victory for Ripple, appears to be in question as the judge in the SEC vs. Coinbase case decided to deny the exchange’s motion to dismiss the lawsuit. As it hapenned with Ripple, the SEC considers that Coinbase operated as an unregistered intermediary of securities.

XRP’s status as a security or non-security influences the SEC’s allegations against Coinbase and ties the two lawsuits together. 

Daily digest market movers: Ripple CLO breaks down SEC’s evidence, application of Howey

  • The SEC’s lawsuit against Coinbase has an impact on the regulator’s lawsuit against Ripple and weighs heavily on the outcome since the cases rely on XRP’s security status. 
  • The SEC alleges that Coinbase engaged in the unregistered sale of US securities through its staking program, from which investors earned interest on their crypto tokens.  At the end of March, the judge rejected the exchange’s motion to dismiss the lawsuit. 
  • Ripple’s Chief Legal Officer (CLO) Stuart Alderoty examined the SEC’s filing in the Coinbase lawsuit and said on its X account that the regulator has offered four different “confusing” definitions of what constitutes a crypto ecosystem. 
  • Alderoty said that in its lawsuit against Ripple, the SEC strayed from “Howey,” a test that determines what qualifies as an investment contract subject to US securities laws. 
  • XRP’s “security” status is at risk since Judge Analisa Torres’ application of Howey in the July 13 ruling is being questioned and has been dismissed by two US federal judges so far. Find out more about this here. 

Technical analysis: XRP price slips below $0.60, no relief in sight

Ripple is trading sideways within a tight range between $0.5670 and $0.6686, two levels that act as key support and resistance for XRP on the daily chart, respectively. The latest decline seems to have some momentum as both the red bars below the neutral line on the Awesome Oscillator (AO) and the Relative Strength Index (RSI) move below the 50 midline, support the bearish thesis. 

XRP price could sweep support at $0.5386, a significant support level on the daily chart and collect liquidity before attempting a recovery to test resistance at $0.6686. A daily candlestick close below the $0.60 level could also trigger a run down to the January 31 low of $0.4853. 


XRP/USDT 1-day chart 

If XRP price closes above $0.6147, the 50% Fibonacci placeholder of its rally from January 31 low of $0.4853 to March 11 peak of $0.7440, it could invalidate the bearish thesis for Ripple. XRP price faces resistance at $0.6686, in its climb to the year-to-date peak of $0.7440. 


SEC vs Ripple lawsuit FAQs

It depends on the transaction, according to a court ruling released on July 14: For institutional investors or over-the-counter sales, XRP is a security. For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.

The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token. While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.

The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at. Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say. Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.

The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation. While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.

The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.


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