Despite the approval of Exchange Traded Funds (ETFs) for cryptocurrencies, investors in the sector continue to grapple with significant legal challenges. The U.S. Securities and Exchange Commission (SEC), which has compared the crypto ecosystem to the “wild west,” has initiated a series of lawsuits that cast a shadow over the industry, particularly concerning the classification of various altcoins as securities.
The Legal Conundrum of Cryptocurrency Classification
The SEC’s application of the Howey test—a framework used to determine what constitutes a security—has been a pivotal issue in recent court hearings. The test’s 90-year-old criteria are ill-suited for evaluating cryptocurrencies, raising concerns about the legal uncertainties faced by companies and investors. The SEC’s stance that investment contracts exist in an “unseen psychological” form has been met with skepticism, as altcoin transactions on exchanges do not typically involve explicit agreements promising profits.
The ongoing lawsuits against major exchanges like Coinbase and Binance question whether the SEC can legitimately accuse these platforms of selling unregistered securities. The inconsistencies in the SEC’s arguments and the judges’ efforts to make sense of the situation suggest that the SEC may lose these cases, potentially leading to a redefinition of altcoins and a celebratory outcome for the industry.
In parallel, Ripple’s XRP Coin investors face their own set of challenges. The protracted legal battle and the increasing circulating supply of XRP have caused a downturn in investor sentiment. Even if XRP were to match its peak market value from the 2021 bull run, the per-token value would only be around $1.3, evidencing the dilution over the past two years.
The legal proceedings show no sign of a swift resolution, and the prospect of a Spot XRP ETF has lost credibility, with even BlackRock dismissing the idea. With the likelihood of extended appeals, significant price surges for XRP Coin in 2024 seem improbable under the current circumstances.