Court Ruling Will Create Ripples for Individual Crypto Investors

Good news for institutional crypto investors: The courts have your back. But as for individual traders: You’re on your own. That was the spirit of a New York district judge’s ruling on an SEC lawsuit against Ripple Labs, which alleged that the crypto firm illegally sold securities. In a split-the-crypto decision, the judge ruled that Ripple Labs' sales of its XRP cryptocurrency to institutional investors were a violation of securities laws. But, the judge said, there was nothing illegal about Ripple Labs selling XRP to individual traders on crypto exchanges. For more on the judge’s logic, see the ruling here and our analysis here. 

If that seems backwards, it’s because it is. Securities laws were specifically designed to protect individual investors, based on the idea that they “can’t fend for themselves,” James Carlson, a New York University adjunct securities regulation professor, told me today. By the same token (see what I did there?), “big institutional investors don’t need the protections of the securities laws.…This effectively stands that philosophy on its head,” he said.