In a recent court ruling on SEC v. Ripple, Brian Korn, a partner at the law firm Manatt, Phelps & Phillips LLP, has shed light on the potential far-reaching consequences for the broader crypto industry’s secondary market. The ruling, which carried intriguing implications, distinguishes between institutional and programmatic sales and raises essential questions about the nature of investments in the crypto space.

Judge Torres, in rendering the decision on July 13, explicitly clarified that she was not addressing whether all secondary trading in XRP is covered by federal securities law. However, she classified institutional XRP sales as investment contracts while excluding programmatic sales from this category. This differentiation between the two types of sales has caught the attention of Brian Korn, who discussed the broader implications for the crypto market.

The pivotal statement from the court emphasized the need for speculative investors to have a “reasonable expectation of profits to be derived from the entrepreneurial efforts of others” for a sale to be classified as a securities offering. Brian Korn finds this distinction curious as it determines whether an offering is classified as a securities offering based on the investor’s intent to profit or simply as a token that might trade higher.

The implications of this ruling extend beyond the Ripple case. Korn raises the question of how any issuer is expected to discern investor intent in a sale of a security, as two identical sales could have different statuses based on the purchaser’s intent and awareness. The ruling also poses the challenge of determining whether secondary stock trading involves securities, as even experts frequently disagree on the trajectory of particular listings.

While both sides in the SEC v. Ripple case are likely to appeal the court’s decision, the bigger point here is the judiciary’s increasing scrutiny of securities laws, which were not initially designed to deal with decentralized technology. Despite this, Ripple emerges as the winner, securing a victory for decentralized protocols.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The NFT and cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.