SEC vs Ripple (XRP) - What You Need to Know

Updated: 19 hours ago

On September 18, 2022, the SEC and Ripple Labs filed motions for summary judgment which would result in a decision right away rather than sending the case to trial.

 

Table of Contents:

Introduction

What is Ripple?

How does Ripple work?

Ripple's Lawsuit Timeline

Latest Development Of the Lawsuit

The Price of XRP is in The Hands of The Judge


Introduction

If you have been in crypto, you probably heard of Ripple's lawsuit. In December 2020, the XRP token's creator, Ripple Labs, was sued by the US Securities and Exchange Commission (SEC), which claimed that Ripple and its current and former chief executives, Garlinghouse and Larsen, had sold XRP in unregistered security offering worth $1.3 billion.


In addition to structuring and promoting the XRP sales used to finance the company's operations, the complaint claims that Garlinghouse and Larsen also carried out personal, unregistered sales of XRP, totaling about $600 million. According to the complaint, the defendants violated the federal securities laws' registration requirements by failing to register their XRP offers and sales or to abide by any exemptions therefrom.

SEC vs Ripple (XRP) What you need to know

What is Ripple?

Ripple is a technology that facilitates financial transactions by serving as both a cryptocurrency and a digital payment network. Ripple was co-founded by Chris Larsen and Jed McCaleb and made its first release in 2012. Similar to the SWIFT system used by banks and financial intermediaries to transact across currencies for international money and security transfers, Ripple's primary process is a payment settlement asset exchange and remittance system.


The pre-mined cryptocurrency token is traded under the ticker symbol XRP. The company and network are referred to as Ripple, and the cryptocurrency token is called XRP. XRP's function is to act as a middleman in the exchange of two different currencies or networks.


How does Ripple work?

The Ripple network doesn't operate on a proof-of-work (PoW) or proof-of-stake (PoS) system like bitcoin or eth 2.0. Instead, in order to verify account balances and transactions on the system, transactions rely on a consensus protocol. In order to improve the integrity of the system, the consensus works to eliminate double-spending.


When a Ripple user initiates a transaction with multiple gateways but tries to send $100 to the gateway system, only the first transaction will be validated, and the rest will be deleted. The consensus among individual distributed nodes determines which transaction was created first. The instant confirmations last for about five seconds. The Ripple platform is referred to as decentralized because there is no central authority that decides who can set up a node and confirm transactions.


Ripple maintains a record of all IOUs issued in a given currency for any user or gateway. The Ripple consensus ledger makes IOU credits and transaction flows between Ripple wallets publicly available. Even though financial transaction history is publicly recorded and made available on a blockchain, the data is not linked to any individual or business's ID or account.


Ripple's Lawsuit Timeline

December 21, 2020 - The SEC has filed a lawsuit against two Ripple Labs executives as well as the company itself. Instead of complying with the SEC's demands, Garlinghouse announced that they would defend themselves in the XRP court case.


December 28, 2020 - Coinbase announced the delisting of the XRP token from the exchange in response to the SEC's lawsuit against Ripple Labs.


March 3, 2021 - Larsen and Garlinghouse argued that the SEC did not receive fair notice in letters to the US District Court Southern District of New York Magistrate.


March 8, 2021 - In response, the SEC asked the judge to hold a hearing right away.


March 22, 2021 - Judge Netburn informed the SEC that the XRP token differs from BTC and ETH in that it has a currency value and utility.


April 13, 2021 - Hester M. Peirce, an SEC commissioner, published the Token Safe Harbor Proposal 2.0 to give developers a three-year grace period to understand how their involvement in decentralized networks relates to exemption from the securities laws.


June 14, 2021 - The judge ordered the SEC to release its emails and internal documents on Bitcoin, Ethereum, and XRP by June 18 after ordering the SEC to do so in March. However, on June 14, the court agreed to the SEC's request to extend the deadline by an additional two months.


August 31, 2021 - The SEC must publish its internal crypto trading policies on this day.


October 15, 2021 - Deadline for requesting expert opinions from those with knowledge of securities and cryptography.


January 24, 2022 - In the SEC's lawsuit alleging that the XRP coin is unregistered security, Judge Netburn has given the SEC until February 17 to appeal her earlier order requiring the defendant Ripple Labs to turn over some sensitive government documents.


April 7, 2022 - Judge Netburn made a decision in favour of allowing Ripple Labs access to internal SEC conversations regarding cryptocurrencies.


September 18, 2022 - The SEC and Ripple Labs both filed motions for summary judgment which would result in a decision right away rather than sending the case to trial.


Latest Development Of The Lawsuit

The SEC and Ripple Labs filed for a "summary judgment," a legal procedure in which a court decides based on the facts presented without ordering a trial, raising the expectation for a decision to be made before the end of the year. XRP rallied from the news indicating that traders were making bets that XRP would take home the win for this case.


The Price of XRP is in The Hands Of The Judge

The team at Ripple Labs has a wealth of experience, and the company has a solid product. However, there is no telling what Judge Analisa Torre's decision will be until the final verdict is announced. In our opinion, if Ripple managed to win the case against SEC, the token would be relisted on American exchanges, triggering a massive rally in XRP price.