Ripple has been disqualified under Rule 506 of Regulation D due to a “bad actor” status, preventing it from selling securities to U.S. institutional investors for a period of five years. Justin W. Keener, who had faced a $10 million fine from the SEC, has made an emergency filing asserting that he possesses “decisive evidence” in support of Ripple. While Ripple has largely triumphed in its prolonged legal battle with the SEC, legal analysts maintain that the outcome leaves significant unresolved regulatory issues. Due to the fact that the lawsuit did not advance to a higher court, the decision made by Judge Analisa Torres—which differentiated between institutional sales of XRP and sales on exchanges—remains non-binding as a legal precedent. Consequently, there is uncertainty for other cryptocurrency companies regarding the regulation of their token offerings and other factors influenced by this ruling, particularly as the SEC alters its regulatory stance. Experts, such as Charly Ho from Rikka, express concerns over these legal ambiguities. Yuriy Brisov from Digital & Analogue Partners (Europe) and Joshua Chu, co-chair of the Hong Kong Web3 Association, have shared their insights on the implications of Ripple’s legal ruling for the cryptocurrency sector, noting that the Ripple lawsuit does not set a significant precedent for the crypto industry. In an interview with a prominent media organization, legal expert Charlie Ho mentioned that although the industry was expecting more legal clarity, both Ripple and the SEC decided to forgo their appeals in favor of reaching a settlement. As a result, this case will not provide a circuit-level precedent that could establish a foundation for wider regulatory advice for other cryptocurrency companies. Conversely, Yuriy Brisov mentioned that while the resolution of the lawsuit is a favorable result for Ripple, it does not significantly benefit the broader industry. In the absence of a binding precedent, cryptocurrency companies exist in a legal uncertainty concerning their adherence to U.S. securities regulations. Even with the SEC’s lawsuit, Ripple will still encounter certain limitations. According to Rule 506 of Regulation D, the blockchain company received a “bad actor disqualification,” banning it from selling securities to U.S. institutional investors for the following five years. Brisov stated that this limitation greatly affects Ripple’s capacity to engage in private token sales with venture capital firms. Although the company is able to function in different markets, its opportunities for institutional fundraising in the United States are still restricted.
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