The recent favorable outcome of the SEC and Ripple case may have potentially provided clarity for DeFi altcoin projects such as AVAX and UNI .
DeFi altcoin market breathes a sigh of relief with Ripple victory
According to a court ruling in the SEC lawsuit, various DeFi altcoins such as Uniswap and Curve are now classified as non-securities . These projects, including Uniswap, Compound, Aave, Curve, Yearn, among others distributed free tokens through an airdrop similar to XRP . This distribution method exempts them from adhering to the first criterion of the Howey Test which requires an “investment of money”.
In contrast, since XRP was freely given to the public in 2013 and also provided to employees at no cost further substantiates its classification as not being a security . The recent definitive decision ensures that trading these tokens on exchanges will not be considered securities . However it is important to note that the court ruled that only 1% of XRP volumes are sales conducted by Ripple Labs.
Consequently, the court has determined that since individual investors are unaware of whether they are purchasing XRP from Ripple Labs or other holders, there is no anticipation of profit . This implies that DApps should ensure a significant portion of their tokens are distributed to the public through an airdrop . The proportion of volume derived from the sale of these tokens held by DApps determines whether such sales would be classified as securities.
Furthermore, the court ruled that the sale of these tokens through off-exchange transactions qualifies as a security . The trial judge specifically highlighted the sale to institutional investors and their clear understanding that they were purchasing from Ripple Labs, thus indicating an expectation of profit . However former SEC executive John Stark has identified certain inconsistencies in this matter.
AVAX and UNI are no longer ‘securities’
The recent ruling on July 13 by the New York court concluded that XRP should not be classified as an investment contract . This decision also extends to DeFi altcoin projects that have been engaged in legal battles with the SEC . Additionally , JPMorgan analysts have observed a resurgence in strength among altcoins previously deemed securities in the Coinbase lawsuit . Consequently, major players such as AVAX and UNI within the DeFi altcoin market are now able to breathe a sigh of relief.
Avalanche (AVAX)
Wrapped Bitcoin (WBTC)
Dai (DAI)
Chainlink (LINK)
Uniswap (UNI)
Lido DAO (LDO)
Internet Computer (ICP)
Aave (AAVE)
The Graph (GRT)
Maker (MKR)
Stacks (STX)
Tezos (XTZ)
Theta Network (THETA)
Fantom (FTM)
Synthetix (SNX)
Injective (INJ)
Curve DAO Token (CRV)
Rocket Pool (RPL)
Compound (COMP)
Conflux (CFX)
Defi projects now need to fear much less from the SEC
The US court has ruled that the SEC does not possess jurisdiction over airdrop activities, which has been widely employed by numerous DeFi projects . Nevertheless, there remains a possibility for the SEC to file an appeal . Ripple CEO Brad Garlinghouse, however expresses confidence that even in such a scenario the market will remain secure for years to come. He firmly believes that cryptocurrencies will ultimately emerge as the victor once again.
