Thursday’s ruling that Ripple Labs Inc did not breach securities law by selling its XRP token on exchanges was the first big setback for the SEC in a decade of enforcement against the cryptocurrency industry

A cryptocurrency developer’s landmark legal win against the U.S. Securities and Exchange Commission (SEC) will spur Coinbase and other firms to withstand the agency’s effort to assert its authority over the sector, according to analysts.

Thursday’s ruling that Ripple Labs Inc did not breach securities law by selling its XRP token on exchanges was the first big setback for the Securities and Exchange Commission in a decade of enforcement against the cryptocurrency industry. Other crypto companies accused of unlawfully operating digital asset exchanges are searching for ways to take benefit of the ruling, as per sources familiar with the matter who asked not to be named.

The crypto sector is up against the SEC and its chair Gary Gensler, who has termed the crypto market a “Wild West” full of fraud. Saying that the majority of crypto tokens are securities, the Securities and Exchange Commission has clamped down on crypto trading platforms, including the top U.S. exchange Coinbase, in a bid to bring the industry under its supervision.

Crypto firms have long contended the Securities and Exchange Commission’s authority but until Thursday no court had supported that view. Now, industry lawyers have ammunition to fight back.

This case will cause people to reconsider, and I think it already has, said Robert Frenchman of Mukasey Frenchman LLP.

In 2020, the SEC sued Ripple and its present and former chief executives, accusing them of conducting a $1.3 billion unregistered securities offering by selling XRP, which Ripple’s founders created in 2012.

U.S. District Judge Analisa Torres in New York on Thursday ruled its sales on public cryptocurrency exchanges were not offers of securities since buyers did not have a fair expectation of profit that depended on Ripple’s endeavours, a crucial aspect in ascertaining if XRP was a security at the time. Nevertheless, she also ruled Ripple’s direct sales of XRP to investors should have been registered as securities, providing the SEC with a partial victory.

Crypto supporters viewed the ruling as a landmark and the judge’s reasoning as a new line of defence for firms such as Coinbase, Binance, Bittrex and other exchanges targeted by the Securities and Exchange Commission on the grounds they were trading securities.

It strengthens Coinbase’s and Binance’s reasoning that the digital assets that are traded on those exchanges would not be considered securities, said Teresa Goody Guillén of Baker & Hostetler.

The SEC’s Gensler said on Monday that the regulator is “disappointed” with the part of the ruling that was in Ripple’s favour.