The verdict from the U.S. District Court for the Southern District of New York was handed down on Thursday, July 13, with a mandatory stipulation that gives the SEC the opportunity to appeal the ruling and change the course of the litigation in its favor.

“After considering economic reality and the totality of the circumstances, the court finds that Ripple Labs’ institutional sales of XRP constituted an unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act,” the court said in its decision.

In doing so, Judge Analisa Torres ruled that XRP cryptocurrency purchase and sale transactions made through the services of digital asset exchanges do not qualify as offers and sales of investment contracts.

Commenting on the court opinion, an SEC spokesperson said the regulator “will make every effort to review the judgment” and reserves the right to appeal.

“The court agreed with the SEC that the Howey test allows for an adequate comparative analysis of cryptocurrency and securities transactions, and rejected Ripple’s arguments about what the company believes constitutes an investment contract. We are satisfied: the court found that various tangible and intangible assets can serve as the subject of an investment contract, and that under certain circumstances, XRP tokens were offered and sold by Ripple to institutional customers in violation of the securities laws,” the SEC said in a statement.

A Commission spokesperson emphasized: federal judge Analisa Torres pointed out that ignorance of securities law does not exempt crypto industry representatives from liability, scheduling new court hearings to determine the personal guilt/innocence of Ripple CEO Brad Garlinghouse and executive chairman Chris Larsen. 

Earlier, Ripple CTO David Schwartz had warned
users about fake XRP token giveaways organized by scammers looking to capitalize on the excitement surrounding the company’s victory in a legal battle with a U.S. regulator.