U.S. judges are providing clarity on the legal status of cryptocurrency tokens. In a series of recent rulings, judges have emphasized that tokens themselves are not inherently securities. These decisions come from cases involving Ripple, Kraken, and Binance, where the SEC sought to categorize these tokens as securities under existing laws.

In the SEC v. Ripple case, Judge Torres explicitly stated that XRP, Ripple’s digital token, is not inherently a security. This ruling addressed the SEC’s argument that XRP, by its nature, should be classified as a security. Judge Torres asserted that XRP does not meet the criteria of an investment contract as defined by the Howey Test. This decision underscores the need to distinguish between the token itself and the sales of the token, which may involve securities laws depending on the circumstances.

Similarly, in the SEC v. Payward Inc. (Kraken), Judge Orrick reinforced this distinction. He remarked that just as orange groves in the Howey case were not securities, cryptocurrency tokens are also not securities by nature. Judge Orrick warned the SEC to be careful in making such claims. He emphasized that arguing tokens themselves are securities could not proceed under the law. This statement reinforces the idea that the context in which tokens are sold or marketed plays a critical role in determining their legal status.

In another case involving Binance, Judge Jackson rejected the SEC’s “embodiment theory.” The SEC argued the tokens themselves represent investment contracts. Judge Jackson disagreed, stating that tokens can be involved in investment contracts but aren’t securities themselves.

These rulings collectively stress the importance of context in applying securities laws to cryptocurrency tokens. While transactions involving tokens can be subject to regulations, the tokens themselves don’t automatically fall under this category. This distinction is crucial for ongoing debates about how cryptocurrencies are regulated in the U.S.