By George Ward
Following Ripple’s recent triumph over the United States Securities and Exchange Commission (SEC), many crypto whales have purchased huge volumes of its governance token (XRP). Judge Analisa Torres’ classification of XRP as a non-security has sparked a considerable rise in investor interest, as evidenced by crucial metrics reported by Santiment, a leading on-chain analytics platform.
A Remarkable Increase
Santiment’s report reveals a remarkable increase in active wallet addresses holding XRP tokens over the past month. These active addresses surged by an average of 23.7% and 43.2% in the last month and year, respectively.
The rise in active addresses is a promising sign for XRP’s ecosystem. It indicates a heightened interest among users and a potential expansion of the token’s utility.
As more addresses become active, more individuals will use XRP for various purposes, such as remittances, micropayments, or investment assets. The increasing network activity also reflects the overall utility of the XRP Ledger.
Whales Accumulate More XRP Tokens
Even though investors have been accumulating XRP tokens before the latest Ripple vs SEC court case verdict, the number has increased. Santiment data indicates that addresses holding 100K-100M XRP tokens have amassed approximately 838M XRP tokens since May.
After Judge Analisa Torres ruled that XRP is not a security, there were more than 637 XRP transactions with a value exceeding $100,000 on July 13. This massive number of transactions boosted XRP’s trading volume causing it to reach 4.46 billion on the same day, its highest level in more than ten months.
This accumulation of XRP tokens indicates a growing belief in the token’s potential. Crypto whales’ accumulation of XRP tokens is vital in diverse ways.
They can significantly impact the market dynamics due to the substantial volume of assets in their possession. These whales’ purchases or sell-offs can create a positive or negative market sentiment resulting in a price uptrend or downtrend.
SEC’s “Common Enterprise” Challenge
While the SEC seeks to appeal Judge Torres’ ruling, Attorney Deaton from Crypto-Law.US pointed out a critical factor that could hinder the SEC’s efforts—the “common enterprise” factor of the Howey test. In “footnote 13” of Judge Torres’ ruling, she acknowledged that a “common enterprise” existed between Ripple and XRP institutional investors.
However, the scope of this common enterprise’s extension remained unanswered, leaving room for interpretation. Hence, Attorney Deaton speculates that the SEC’s challenge lies in proving this “Common Enterprise” part of the Howey test.
If the SEC’s appeal is successful, a potential scenario would involve a remand, where the case would return to Judge Torres for further action. The “common enterprise” factor is crucial to the Howey test. It determines whether an investment contract qualifies as a security or commodity.
It refers to pooling resources and efforts towards a common goal, where investors expect to receive reasonable profits. Before the SEC can establish a “common enterprise” between Ripple and XRP holders, they must demonstrate a clear link between the two parties’ interests beyond mere ownership of XRP tokens.
Reason For SEC’s Loss
According to Deaton, the SEC’s case against Ripple failed because its theory was deemed “circular and conclusory.” This weakness in the SEC’s argument was one of the critical factors that led to Ripple’s victory in the court.
The SEC’s argument faced scrutiny for its lack of clarity and definitive evidence. The court found the SEC’s views inadequate in establishing a common enterprise between Ripple and XRP holders, particularly retail investors.
Furthermore, Judge Torres ruled that Ripple’s XRP sales on exchanges did not constitute securities. Torres stated that there is a difference between institutional and retail XRP holders, as the latter group does not expect direct profits from Ripple’s business operations.