SEC vs Ripple: Here's What You Need to Know!

Bittime -  SEC vs Ripple is an ongoing legal case in the Southern District Court of New York, United States. This case has been going on since 2020, where the company was accused of carrying out unregistered securities offerings by selling XRP to public investors since 2013.

In this case, the Securities and Exchange Commission ( SEC ) accused Ripple Labs Inc. and two of its executives, Brad Garlinghouse and Christian Larsen, have sold more than $1.3 billion worth of digital assets XRP without registering it as a securities offering. 

Ripple Labs denies these accusations and claims that XRP is not a security, but a digital currency that has its own functions and utilities.

This case has a significant impact on the crypto industry, as it could determine the legal and regulatory status of XRP and other digital assets in the future.

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What Are XRP and Ripple Labs?

XRP is a digital asset created by Ripple Labs in 2012. XRP is one of the largest digital currencies in the world, with a market capitalization of approximately $40 billion as of August 2023. 

XRP is used as a fast, cheap and efficient cross-border payment tool, via the RippleNet network operated by Ripple Labs.

RippleNet is a global payments network consisting of hundreds of financial institutions, such as banks, exchanges, and payment service providers, that use a distributed consensus protocol to validate XRP transactions.

Ripple Labs is a financial technology company based in San Francisco, California, founded in 2012 by Chris Larsen and Jed McCaleb.

Ripple Labs aims to create a more inclusive, open and democratic global payments system, using blockchain technology and digital assets. 

Ripple Labs has more than 500 employees and has received funding from several prominent investors, such as Andreessen Horowitz, Google Ventures, and SBI Holdings. Ripple Labs also has around 6.4 billion XRP in its wallet, and can sell some of that XRP every month according to agreements made with other XRP holders.

Also Read: Ripple Coin (XRP): An Update 2024

Why is the SEC Suing Ripple Labs?

The SEC sued Ripple Labs in December 2020, arguing that the company had been conducting an unregistered securities offering by selling XRP to public investors since 2013. The SEC claimed that XRP is a security, that is, a financial instrument that represents an ownership right or claim on an entity or project. 

The SEC believes that XRP meets the criteria of the Howey test, which is a legal test used to determine whether a contract, transaction, or scheme constitutes an offering of securities or not.

According to the Howey test, an offering of securities occurs if there is an investment of money in a joint venture with the hope of gaining profits from the business or efforts of others.

The SEC alleged that Ripple Labs and two of its executives, Garlinghouse and Larsen, sold more than $1.3 billion worth of XRP without registering it as a securities offering, or meeting the requirements for an exemption from registration. 

The SEC also alleged that Ripple Labs and its executives misled the investing public by providing incomplete, inaccurate, or inconsistent information about XRP and Ripple Labs' business. 

The SEC is demanding that Ripple Labs and its executives stop sales of unregistered XRP, return the money earned from those sales, pay civil penalties, and be subject to a permanent ban from participating in future digital securities offerings.

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How Will Ripple Labs Respond?

Ripple Labs denied the SEC's allegations and filed its legal defense in court. Ripple Labs claims that XRP is not a security, but a digital currency that has its own function and utility, such as Bitcoin and Ethereum, which have been recognized by the SEC as digital assets that do not fall into the category of securities. 

Ripple Labs argues that XRP does not meet the criteria of the Howey test, as there is no investment of money in the joint venture, no expectation of profit from Ripple Labs' venture or efforts, and no interdependence between the value of XRP and the performance of Ripple Labs.

Ripple Labs also claims that the SEC has failed to provide legal certainty and fair notice to Ripple Labs and public investors regarding XRP's legal status as a security. 

Ripple Labs points out that the SEC has allowed XRP to circulate in the market for more than seven years without providing any indication that XRP is a security, and has even acknowledged that XRP is a legitimate digital currency in several official documents. 

Ripple Labs also pointed out that the SEC has gone against the views of other regulators, such as the US Department of the Treasury and the US Department of Justice, which have classified XRP as a virtual currency subject to anti-money laundering and anti-terrorism rules.

Also Read: Understanding Stellar (XLM): Digital Currency for Global Payments

What is the Impact of the SEC vs Ripple Case?

The SEC vs Ripple case has a significant impact on the crypto industry. Because, this can determine the legal and regulatory status of XRP and other digital assets in the future. 

If the SEC wins, then XRP could be declared an unregistered security, which could result in XRP being banned from circulation on many crypto exchanges, reducing liquidity and demand for XRP, and drastically lowering the price of XRP. 

Additionally, the SEC could use the ruling as a precedent to target other digital assets deemed to be unregistered securities, and threaten the development and innovation of the crypto industry as a whole.

If Ripple Labs wins, then XRP can be declared a digital currency that does not fall into the category of securities, which could increase the confidence and adoption of XRP in the market, increase the liquidity and demand for XRP, and raise the price of XRP significantly. 

Additionally, Ripple Labs can use the ruling as proof that XRP is a legitimate and useful digital asset, and can continue its mission to create a more inclusive, open, and democratic global payment system, using blockchain technology and digital assets.

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To be able to buy crypto assets on Bittime , make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet . For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. 

Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH) , Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Also read:

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Get to know the Securities and Exchange Commission (SEC) and its role)

Ripple CEO Confirms Temporary Postponement of IPO

Latest XRP Price Predictions Based on Technical and Fundamental Analysis

DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.