The Ripple trial is important for the company and the entire cryptocurrency market as regulators are trying to label XRP as a security. But the lack of clear criteria for dividing cryptocurrencies into different classes leads to a consequent weakness in the courts.

Developers minted 100 billion XRP coins, 80 billion of which were gifted to Ripple (this is how the company explains its non-involvement in the token's issuance). Between 2013 and 2018, the company garnered investments from funds and individuals by selling $1.3 worth of cryptocurrency. The SEC considered that to be an ICO and labelled XRP a security.

In 2020, the SEC sued Ripple. Since then, the debate has proceeded with mixed success. The regulator's weakness was the lack of clear criteria for recognising cryptocurrencies as securities and a speech by the SEC's former Director of Corporation Finance, William 'Bill' Hinman, who referred to Bitcoin, Ethereum and XRP as commodities. The discussion on this aspect in court reached a ridiculous point, as SEC officials refused to identify the person in the video.

Sensing a weak spot, Ripple's lawyers requested Hinman's reports. The SEC claimed his assessment was a "personal point of view" that had nothing to do with the case and refused to provide any documents. On 16 May, Judge Analisa Torres ruled that the privilege of the deliberative process didn't protect the transcript of Hinman's speech and was a judicial document subject to the presumption of public access.

Some media spread the word, calling the judge's decision "a victory for Ripple", followed by a 9% jump in Ripple's value in the 12 hours following the news.

However, potential investors must consider some crucial factors. First, the publication of Hinman's speech doesn't mean that Ripple has beaten the SEC. The trial will continue, and a final decision is expected within a year. The majority of such manipulative headlines have resulted in subsequent price deflation (see our March article "Pump & Dump? XRP"). 

Second, Ripple continues to use reserved XRP to fund its operations. The circulating supply now stands at 52 billion coins, with 43 billion in escrow with the company. It can sell up to 1 billion coins every month (learn more about the mechanics).

XRP is a centralised coin where the company is the key owner and approves the list of recommended validators. The company's ups and downs directly affect XRP's value. A Ripple court victory in 2023 is possible, but it has more to do with legislative gaps and the regulator's weak position.

StormGain Analytical Group 
(platform for trading, exchanging and storing cryptocurrency)