Table of Contents
Ripple Vs. SEC lawsuit has been doing rounds in the crypto market for quite some time now. However, the crypto market has been highly volatile lately, Ripple Vs. SEC case remained constant. Crypto investors are eagerly waiting for the final verdict, as the XRP token was one of the trendiest cryptos before the market went down in 2022, suffering a loss of over 70% of its value.
In this blog, let’s see what happened and what you can expect as an investor once this lawsuit ends.
What is the SEC’s case against Ripple?
Ripple Labs, a fintech company founded in 2012, initially planned to provide financial institutions with fast, cost-effective solutions for cross-border money transfers. To do this, they created the RippleNet network, which enables real-time settlement and clearance of transactions using the XRP crypto.
However, XRP grew beyond its original goal over time. Ripple Labs’ founders used XRP as a digital asset to raise funding in 2013. As a result, the Securities and Exchange Commission (SEC) of the United States filed a lawsuit against Ripple Labs and its current and past CEOs in 2020. The question is, what led the SEC to file a lawsuit against Ripple?
According to the SEC’s accusations, the company’s leadership performed an Initial Public Offering (IPO) of XRP during the capital-raising phase, which qualified as an unregistered security. According to the accusation, Ripple sold XRP tokens, which were classed as unregistered securities, to investors in the United States and around the world, resulting in fund generation. Furthermore, Ripple provided billions of XRP in exchange for non-cash activities such as market-making and labor.
According to the lawsuit, Chris Larsen, Ripple Labs’ co-founder and previous CEO, and Brad Garlinghouse, the current CEO, were involved in personal unregistered XRP transactions totaling nearly $600 million. They also helped structure and promote XRP sales to help the company’s operations. Furthermore, the defendants failed to register their XRP offers and sales or meet the requirements for any exemption from registration, so violating the federal securities laws’ registration restrictions.
Are you also thinking, why is this lawsuit such a big deal? Let’s find out in the following section.
Why is the Ripple lawsuit crucial?
The SEC-Ripple battle greatly impacted the crypto market, particularly when blockchain initiatives were operating with no governmental oversight. Although there were concerns about future regulatory interventions, this case stood out as a significant example of a securities regulator directly pursuing an Initial Coin Offering (ICO).
If Ripple loses the lawsuit, it might create a precedent for similar actions against other crypto companies, potentially leading to harsher industry rules. The SEC contends that Ripple’s ICO, and thus all ICOs, involve the sale of a security that must be registered.
A court decision in favor of the SEC would effectively establish the SEC as the principal regulatory body for the crypto realm.
What now? Is Ripple winning the lawsuit?
As the SEC charged XRP in 2020 for failing to register its security features, it created a possibility of significant losses for token holders. The lawsuit primarily focused on the potential ramifications if Ripple lost the case, which included significant financial fines.
Unlike many other projects that choose to settle, Ripple’s CEO chose to fight the charges. The legal struggle has been going on for three years, and based on the current situation, Ripple is projected to win. If the judgment is favorable, Ripple’s reputation will be restored, resulting in a spike in investor adoption of the platform’s unique global payments system. Furthermore, XRP tokens will be completely legitimized and regulated, much like Bitcoin, cementing XRP’s status as one of the market’s most trusted cryptos.
These reasons are anticipated to cause a huge spike in the value of all XRP tokens. Some experts believe that the price of XRP will return to former all-time highs.
Bottomline
The crypto stakeholders are hoping for Ripple’s victory, but SEC seems to have different plans. Recently, SEC has filed cases against two of the biggest crypto exchanges in the world, Binance and Coinbase. The crypto space has been in shock, and the trust of investors and traders has also been shaken. Everybody is looking forward to what happens next. What are your thoughts on this whole case?
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
