Ripple Labs has won a landmark victory in its legal battle against the U.S. Securities and Exchange Commission (SEC). On July 12, 2023, Judge Sarah Netburn ruled that XRP, the native cryptocurrency of the Ripple network, is not a security in most cases.

The SEC had alleged that Ripple had violated securities laws by selling XRP as an unregistered security. However, Judge Netburn found that XRP did not meet the Howey test, the legal definition of a security, in most cases. The Howey test requires that an investment contract (1) be an investment of money (2) in a common enterprise (3) with a reasonable expectation of profits to be derived from the efforts of others.

Judge Netburn found that XRP did not meet the first prong of the Howey test because it is not an investment of money in most cases. XRP is a digital asset that can be traded on exchanges, but it is not a traditional investment like stocks or bonds. XRP holders do not receive dividends or other financial benefits from Ripple, and they do not have a right to control the company.

Judge Netburn also found that XRP did not meet the second prong of the Howey test because it is not a common enterprise in most cases. The SEC had argued that XRP holders were part of a common enterprise because they all benefited from the success of the Ripple network. However, Judge Netburn found that XRP holders did not have a common investment objective. Each XRP holder is free to use their XRP however they see fit, and they do not have to rely on the efforts of others to make a profit.

However, Judge Netburn did find that XRP was a security when it was sold to institutional investors. In these cases, the institutional investors were relying on the efforts of Ripple to make a profit. For example, the institutional investors were relying on Ripple to develop the Ripple network and to promote the use of XRP.

The ruling is a major victory for Ripple and its supporters. It could have a significant impact on the cryptocurrency industry, as it could pave the way for other digital assets to be classified as non-securities in most cases.

The SEC has not yet said whether it will appeal the ruling. However, if the ruling is upheld, it would be a major setback for the SEC's efforts to regulate cryptocurrencies.

The ruling is also a victory for XRP holders. The price of XRP surged following the ruling, and it is now trading at its highest level in over a year.

The ruling is a significant development in the legal battle between Ripple and the SEC. It is too early to say what the long-term implications of the ruling will be, but it is clear that the ruling is a major victory for Ripple and the broader crypto industry.