This week the blockchain behemoth Ripple that stands behind the seventh largest cryptocurrency XRP and the XRP Ledger scored an important victory in court. The judge rejected the proposal of the Security and Exchange Commission (the SEC) to make Ripple pay astounding $2 billion in civil penalties. Instead, the judge reduced this sum by approximately 94%, and the blockchain company ended up having to pay only $125 million.
Ripple’s initial proposal in court was, though, that they should pay not more than $10 million. Still, they humbly accepted the court’s decision. The Ripple chief executive officer Brad Garlinghouse commented on this on his X (formerly Twitter) handle, calling it a big win not only for the company but for the whole crypto industry as well.
Background of the Ripple vs SEC case
This renowned legal case started in late 2020, when the acting chairman of the SEC Jay Clayton sued Ripple and two of its highest-ranking executives: founder and executive chairman Chris Larsen and chief executive Brad Garlinghouse.
The allegations that the regulatory agency brought to the court were Ripple selling unregistered securities (that’s how they referred to XRP) to institutional investors and Garlinghouse together with Larsen selling their own XRP tokens to institutions and making more than $1 billion in profit on that. Besides, the company was accused by the regulator of violating federal security laws and failing to register XRP as this type of an asset.
After that, Clayton retired and Gary Gensler was appointed to his position. Contrary to withdrawing the case, as many in the crypto industry hoped, Gensler doubled down on it, taking it further. The legal attack of the regulator immediately made XRP “illegal” in the eyes of many centralized trading platforms as they began to suspend XRP trading (read “delist XRP”). Those included such major and oldest exchanges as Coinbase, Bitstamp, and many others. The XRP price took a big hit, falling to the $0.31 level briefly. The cryptocurrency market and the whole industry faced uncertainty rising to unprecedented levels.
Ripple’ legal teams argued in court that XRP was a digital currency, not a security, just like Bitcoin and Ethereum officially acknowledged as commodities by the SEC and the CFTC (Commodities Futures Trading Commission). Ripple’s lawyers insisted that the SEC’s treatment of XRP and its classification as a security were inconsistent with the way the regulator treated BTC and ETH. Besides, Ripple stated in court that XRP had been circulating the crypto market many years before the law suit started and the SEC had never made any statements about XRP being a security until December 2020 when it began the lawsuit.
Court’s pivotal decision in 2023 and now in 2024
In July 2023, US District Judge Analisa Torres made a pivotal ruling in this case as she delivered a somewhat mixed verdict. Her ruling had it that XRP sales to retail investors on public crypto exchanges did not constitute security sales since they did not violate laws that regulate securities – retail investors did not have any reasonable expectations of profit which depended on Ripple’s direct actions. However, Ripple selling XRP to financial institutions did qualify as selling unregistered securities.
The SEC then demanded that Ripple should pay $2 billion in fines. However, this week the long-awaited court ruling was delivered and judge ruled that this amount proposed by the SEC was too high and settled for only $125 million since the case did not involve any allegations of fraud or intentional wrongdoing, and no one suffered any financial harm, according to the chief legal officer of Ripple, Stuart Alderoty.
Besides, Brad Garlinghouse emphasized that all the headwinds for Ripple have now been removed thanks to the court’s ruling.
Impact on the XRP price
This court decision has had a positive impact on the XRP price – it spiked by approximately 25.58%, rising from $0.5000 to $0.62300. The market showed a positive reaction to this news. This pivotal court decision drastically reduced the regulatory uncertainty for cryptocurrency assets in the US and revived investor confidence.
Ripple’s position as a leading market player has been strengthened to a large degree and now the company can focus on expanding its business within the US and take on more institutional partners and customers.
Now that Ripple has reached the long-expected victory over the Securities and Exchange Commission, many analysts expect that by the end of 2024 XRP is likely to soar past the $1 level and restore its earlier position on the top list of cryptocurrencies in terms of market capitalization size.
