Federal Judges Cast Doubt on XRP’s Non-Security Status: What’s Next?

The ruling from July 2023, which classified XRP as a “non-security” in secondary market sales, is facing challenges. Two federal judges have raised concerns about applying the Howey Test to XRP, suggesting that the token may be declared an unregistered security.

Charles Gasparino, an American journalist and XRP expert, has highlighted there is a discrepancy in Judge Analisa Torres’ application of the Howey Test. Gasparino suggests that Judge Torres’ ruling may be faulty, and there’s a possibility it could be reversed.

Federal judges in other cases beyond Ripple are closely examining the application of the Howey Test, a legal standard used to determine if an asset qualifies as an investment contract and, consequently, a security. If the ruling on the Howey Test is reversed, there’s a possibility that XRP could be categorized as an unregistered security. Such a classification would not be a good sign for both Ripple and XRP holders.

However, XRP supporter Bill Morgan disagreed with Gasparino’s views, asking for proof to back up Gasparino’s claim that judges were skeptical about Judge Torres’ rulings. Morgan urged Gasparino to point out specific parts of court decisions where judges showed doubt about arguments related to the SEC v Ripple case. He noted the difference between motions to dismiss and summary judgment decisions, implying Gasparino might not have enough evidence for his claims.

Ripple’s CLO, Stuart Alderoty, has raised doubts over the SEC’s influence on legal proceedings, anticipating challenges for the regulator as evidence is produced in the Coinbase lawsuit.

Whale Accumulation

Even though the legal case is going on, on-chain metrics show that large XRP holders, known as whales, have been accumulating XRP. Data from Santiment shows that whales holding between 10 million and 100 million tokens added 190 million XRP tokens to their holdings between March 27 and April 1. This suggests that whales may buy the dip and anticipate future price increases.

But technically, XRP’s price has been range-bound between $0.9380 and $0.4226 for over 460 days. Currently, it is trading above the psychologically important $0.60 level. The Relative Strength Index (RSI) and Awesome Oscillator (AO) indicators suggest bullish momentum, hinting at a potential price recovery.

Potential Recovery Scenarios

Despite the legal uncertainties, there is a possibility of a recovery in XRP’s price. The target for recovery is the year-to-date peak of $0.7440, roughly 16% away from the current price of $0.6233. However, this recovery may be a rally on Bitcoin’s price movement, as a correction in Bitcoin’s price could negatively impact XRP and other crypto.

In the 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 significant drop from current levels and highlights the potential downside risks associated with XRP’s legal uncertainties.


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