Judge Cites Ripple Case in Rejecting CEL’s Security Classification in Bankruptcy Proceedings

Judge Charles Breyer of the United States Bankruptcy Court for the Northern District of California has cited the Ripple case in his recent decision to reject the claim of cryptocurrency startup, CEL, that its digital assets should be granted “security” status in bankruptcy proceedings. The case centered around CEL’s Series CEL tokens, which the company had planned to use to carry out a debt transaction. Judge Breyer used the case of Ripple Lab Inc v. U.S. Securities and Exchange Commission, which is currently pending before the U.S. Court of Appeals for the Ninth Circuit, to illustrate his point that the CEL tokens are not “securities.” Specifically, Judge Breyer noted that the SEC had argued in the Ripple case that the XRP tokens “are not an investment contract or security” and that the SEC was arguing that the primary interest of holding Ripple’s XRP tokens was to use them to facilitate transactions. Citing this, Judge Breyer stated that CEL’s Series CEL tokens were also not securities, as their main use was to facilitate debt transactions. Judge Breyer's decision to reject CEL's security classification in bankruptcy proceedings demonstrate the court's view of digital assets like cryptocurrency. In particular, Judge Breyer noted that the primary purpose of the tokens is to facilitate transactions, rather than act as an investment contract, as is usually the case with securities. Moreover, Judge Breyer’s citation of the Ripple case is likely to have a wider impact, as it indicates a growing acceptance of digital assets by regulators and the court system.