Federal Judges Cast Doubt on XRP’s Non-Security Status

XRP flyer

The ruling issued in July 2023, which designated XRP as a “non-security” in secondary market transactions, is encountering challenges. Concerns have been raised by two federal judges regarding the application of the Howey Test to XRP, suggesting that the token might be deemed an unregistered security.

Risk of Overturning, Legal Insight

Charles Gasparino, an American journalist and XRP expert, has pointed out a discrepancy in Judge Analisa Torres’ application of the Howey Test. Gasparino indicated that Judge Torres’ ruling could be flawed, potentially leading to its reversal.

Federal judges in cases unrelated to Ripple are scrutinizing the application of the Howey Test, a legal benchmark used to ascertain if an asset qualifies as an investment contract and, consequently, a security. If the interpretation of the Howey Test is overturned, XRP could face classification as an unregistered security. Such a classification would have negative implications for both Ripple and XRP holders.

However, XRP supporter Bill Morgan disagreed with Gasparino’s assertions, demanding evidence to substantiate Gasparino’s assertion that judges harbored doubts about Judge Torres’ rulings. Morgan urged Gasparino to pinpoint specific sections of court rulings where judges displayed skepticism regarding arguments related to the SEC v Ripple case. He emphasized the distinction between motions to dismiss and summary judgment decisions, implying Gasparino might lack sufficient evidence for his claims.

Whale Accumulation

Stuart Alderoty, Ripple’s Chief Legal Officer, has expressed skepticism about the SEC’s influence on legal proceedings, anticipating challenges for the regulator as evidence emerges in the Coinbase lawsuit.

Amidst the ongoing legal proceedings, on-chain data reveals that large XRP holders, commonly referred to as whales, have been accumulating XRP. According to data from Santiment, whales holding between 10 million and 100 million tokens acquired 190 million XRP tokens between March 27 and April 1. This suggests that whales may be purchasing during dips and anticipating future price rises.

Despite the legal uncertainties, XRP’s price has been range-bound between $0.9380 and $0.4226 for over 460 days, currently trading above the psychologically significant $0.60 level. Bullish momentum is indicated by the Relative Strength Index (RSI) and Awesome Oscillator (AO) indicators, hinting at a potential price recovery.

Potential Recovery Scenarios

Despite the legal uncertainties, there is potential for a price recovery in XRP. The target for recovery is the year-to-date peak of $0.7440, approximately 16% higher than the current price of $0.6233. However, this recovery may be influenced by movements in Bitcoin’s price, as a correction in Bitcoin’s price could negatively impact XRP and other cryptocurrencies.

In a downside scenario, XRP’s price could decline to the January 28 low of $0.4853 or the weekly support level at $0.4117. This represents a substantial drop from current levels, underscoring the potential downside risks associated with XRP’s legal uncertainties.

Author: Simeon

Simeon is a seasoned crypto writer with a passion for exploring the fascinating world of blockchain and digital currencies. With a background in finance and technology, Simeon brings a unique perspective to his writing, delving into the complexities of decentralized finance, cryptocurrency trading, and emerging blockchain projects.