{"id":42406,"date":"2018-04-06T18:05:16","date_gmt":"2018-04-07T01:05:16","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=42406"},"modified":"2026-04-20T08:25:05","modified_gmt":"2026-04-20T07:25:05","slug":"ripple-security","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/ripple-security\/","title":{"rendered":"Is XRP classified as a security under U.S. law?"},"content":{"rendered":"

Ripple was denied access to two major U.S. cryptocurrency exchanges, Coinbase and Gemini, due to regulatory concerns. The question as to whether to cryptocurrency is a security seems to underpin the issue.<\/p>\n

Ripple (XRP)<\/a> is a cryptocurrency that provides a settlement solution for international bank transfers.<\/p>\n

Through the use of a centralized blockchain, Ripple has the potential to reduce transaction fees and clearing times for bank transfers.<\/p>\n

Ripple is the third-largest cryptocurrency by market capitalization sitting at $19.4 billion, up 1400% since this time last year.<\/p>\n

Ripple Attempts to Purchase Access to U.S. Exchanges<\/h2>\n

According to Bloomberg<\/a>, Ripple recently attempted to purchase access to cryptocurrency exchanges Coinbase and Gemini. If Ripple were listed on one of these U.S. exchanges, the price and liquidity would likely increase.<\/p>\n

However, both exchanges declined to list Ripple; Gemini still declined even after a supposed $1 million offer to list XRP.<\/p>\n

Potential Security Classification Hurting Ripple<\/h2>\n
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The 1933 Securities Act<\/a> still governs much of U.S. securities law 85 years later<\/figcaption><\/figure>\n

Ripple's use as a settlement platform could cause it to fall under the scrutiny of U.S. securities laws. Such a classification increases the risk of litigation for both Ripple and any partner exchanges.<\/p>\n

The standard method to determine whether an asset is a security is the Howey Test. The test stems from a 1946 Supreme Court opinion in\u00a0SEC v. W. J. Howey Co.<\/a>, which clarified laws from the Securities Act of 1933<\/a>. According to the case, an asset is classified as a security if:<\/p>\n

    \n
  1. It is an investment of cash (or cash equivalents).<\/li>\n
  2. There is an expectation of profit from the investment.<\/li>\n
  3. The money is invested in an entity such as a corporation or project.<\/li>\n
  4. Profit from the investment comes from the effort of a 3rd party, i.e. the corporation.<\/li>\n<\/ol>\n

    Analysis of Ripple Based on the Howey Test<\/h2>\n

    Unlike utility tokens which fall under a legal gray area, based on the above criteria Ripple may fall under the classification as a security:<\/p>\n