Ripple Price Forecast: XRP rally faces uncertainty after Court denies SEC-Ripple joint motion
- Judge Analisa Torres denies the SEC and Ripple’s joint request for an indicative ruling to dissolve the $125M penalty injunction.
- Judge Torres cited procedural issues, emphasising the need for a compelling case to justify withdrawing her ruling.
- XRP’s price shows strength, rising slightly above support at $2.40, although its upside potential remains uncertain.
Ripple (XRP) price trades broadly sideways at around $2.41 on Friday, rising slightly after a minor correction from this week’s peak of $2.65 to support $2.34. This comes after United States (US) District Judge Analisa Torres rejected Ripple Labs and the Securities and Exchange Commission’s (SEC) joint request for an indicative ruling. The parties had reached a settlement agreement last week, pending judicial approval.
SEC-Ripple joint request for an indicative ruling denied
Judge Analisa Torres of the US District Court Southern District of New York has rejected a joint request by Ripple and the SEC for an indicative ruling that would have seen the token issuer pay only $50 million as a penalty instead of the $125 million imposed by the Court in 2024.
The lawsuit filed by the SEC in December 2020 alleged that Ripple “engaged in the unlawful offer and sale of securities in violation of Section 5 of the Securities Act.” According to the July 12, 2023 ruling, “the Court granted in part and denied in part the parties’ demand for summary judgment.”
Judge Torres ruled that the sale of XRP on the open market or cryptocurrency exchanges did not constitute a security. However, Ripple had a case to answer for its direct institutional sale of XRP tokens.
Ripple was penalised $125 million, significantly below the SEC’s initial request of $2 billion for violating, in part, the Securities Act. The money was deposited in an interest-bearing account, but Ripple and the SEC appealed the ruling, with the cross-appeals pending judgment before the Second Circuit.
Ripple and the SEC agreed on May 8 to seek to settle the lawsuit in both the District Court and the Second Circuit. The parties mutually agreed that Ripple pays $50 million to the SEC upon the Court’s vacation of the injunction against Ripple Labs, subsequently lowering the penalty by 60%.
On dismissing the joint request for indicative ruling, Judge Torres cited procedural issues, adding that the District Court must “determine whether the proposed consent decree is fair and reasonable with the additional requirement that the public interest would not be disserved in the event the court” moves to grant the motion effectively ending the lawsuit.
Despite the denial, Judge Torres outlined a clear path that must be followed by the SEC and Ripple to ensure the agreement is fair and reasonable. According to crypto lawyer John Deaton, the Court must ascertain that the thousands of legal hours and judicial manpower committed to the case in the last five years did not go to waste.
Ripple’s Chief Legal Officer, Stuart Alderoty, said after the ruling that Ripple will work with the SEC to revisit the matter. Alderoty clarified that the ruling does not jeopardise Ripple’s past wins, as XRP is not a security.
XRP’s uptrend holds steady despite the ruling
XRP’s price gains slightly over 1% on Friday, trading around $2.41 at the time of writing. The token’s short-term technical outlook is structurally bullish with the Moving Average Convergence Divergence (MACD) sitting above the mean line. At the same time, the MACD line (blue) gap above the signal line (red) upholds the buy signal confirmed on May 8. A buy signal manifests when the MACD line crosses above the signal line.
XRP’s position above three up-trending moving averages, ranging from the 50-day Exponential Moving Average (EMA) at $2.27, the 100-day EMA at $2.25, to the 200-day EMA at $2.03, signals a strong bullish momentum.
XRP/USDT daily chart
For now, the uptrend’s target at $3.00 remains in sight, with traders likely to look for a daily close above $2.40, the immediate support. A break above the weekly peak of $2.65 would encourage traders to buy XRP, as confidence improves for a breakout to $3.00.
However, XRP is not out of the woods, and extended declines toward the 200-day EMA support at $2.00 cannot be ruled out yet. The Relative Strength Index (RSI) indicator at 56.36 reflects the drawdown from $2.65 in the last few days. If headwinds overshadow demand, XRP could explore lower levels as the RSI indicator slides below the midline at 50 towards the oversold region.
SEC vs Ripple lawsuit FAQs
It depends on the transaction, according to a court ruling released on July 14, 2023: 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 had to pay a $125 million civil fine.
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 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.
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