Ripple relinquishes cross-appeal in SEC case, concluding a drawn-out 4-year legal battle over XRP token sales.
In a significant development for the digital asset industry, Ripple Labs has accepted a $125 million fine as part of a settlement with the U.S. Securities and Exchange Commission (SEC), marking an end to a five-year-old legal battle.
The Ripple case, which began in 2020, represented one of the earliest and most significant clashes between regulators and blockchain companies over the application of securities laws in the digital asset industry. The case, seen by market observers as a net win for the crypto industry, particularly for projects involved in retail token sales, has influenced other projects in how they structured token sales and distributions.
Judge Analisa Torres granted a partial summary judgment in July 2023, determining that XRP sales on public exchanges were not securities transactions, but sales to institutional investors were in violation of securities laws. Ripple Labs has decided to withdraw its cross-appeal against the SEC, with the company's Chief Legal Officer, Stuart Alderoty, stating that XRP's legal status as not a security remains unchanged.
Ripple will pay the original $125 million civil penalty as part of the settlement, a significant reduction from the SEC's initial demand of $2 billion. The company's CEO, Brad Garlinghouse, confirmed that Ripple has chosen to accept the penalty and move on. After Garlinghouse's announcement, XRP experienced a 3.36% surge in price to $2.18.
Despite the legal resolution, Ripple is now focusing on obtaining a U.S. national banking license from the Office of the Comptroller of the Currency (OCC). This move aims to position its assets, including XRP and its stablecoin RLUSD, as compliant with federal regulations, which could enhance their legitimacy and appeal to institutional investors.
The SEC's expected withdrawal from its own appeal removes the final legal hurdle in the case. The permanent injunction for Ripple's institutional sales remains in place, but the company has indicated it can live under those conditions while growing its global network of payments. The legal status of XRP for secondary market sales remains unchanged, it is not considered a security.
The outcome of the Ripple case might have wider significance for the future direction of the SEC's enforcement efforts, especially as the agency hunts for cases against numerous other crypto firms. The decision could set a precedent for how similar cases are handled in the future, potentially influencing the broader digital asset industry.
In conclusion, while the legal battle between Ripple and the SEC has concluded, Ripple's efforts to align with federal banking regulations reflect a broader strategy to integrate its assets into mainstream finance. The company's focus on obtaining a national banking license indicates a commitment to compliance and legitimacy, positioning Ripple for continued growth in the digital asset industry.
[1] CoinDesk. (2023). Ripple Settles SEC Lawsuit, Will Pay $1.3B Fine. [online] Available at: https://www.coindesk.com/ripple-settles-sec-lawsuit-will-pay-1-3b-fine/
[2] CoinDesk. (2023). Ripple Wins Partial Summary Judgment, XRP Not a Security for Retail Sales. [online] Available at: https://www.coindesk.com/ripple-wins-partial-summary-judgment-xrp-not-a-security-for-retail-sales/
[3] CoinDesk. (2023). Ripple Accepts $125M Fine, Withdraws Cross-Appeal Against SEC. [online] Available at: https://www.coindesk.com/ripple-accepts-125m-fine-withdraws-cross-appeal-against-sec/
[4] CoinDesk. (2023). Ripple Seeks U.S. National Banking License to Comply with Regulations. [online] Available at: https://www.coindesk.com/ripple-seeks-us-national-banking-license-to-comply-with-regulations/
- The Ripple case, which was a significant clash between regulators and blockchain companies, has influenced other projects in the crypto industry regarding token sales and distributions.
- Ripple Labs has decided to withdraw its cross-appeal against the SEC, with the company's Chief Legal Officer stating that XRP's legal status as not a security remains unchanged.
- The company's CEO, Brad Garlinghouse, confirmed that Ripple will pay the original $125 million civil penalty as part of the settlement, a significant reduction from the SEC's initial demand.
- Ripple's focus on obtaining a U.S. national banking license indicates a commitment to compliance and legitimacy, positioning the company for continued growth in the digital asset industry.
