Ripple vs SEC: Is This the Final Chapter?

The Legal Battle Goes On

On August 8, 2024, Southern District of New York Judge Analisa Torres reduced the fine for Ripple regarding its sale of XRP to institutional clients, a move previously ruled as a breach of federal securities laws. Ripple faced a $125 million fine—a substantial reduction from the SEC's demand for $2 billion. The court's decision to lessen the penalty was based on the finding that, while Ripple was at fault, there was no concrete evidence that investors had been harmed.

With 60 days to appeal the ruling, will either side seize the chance?

Ripple's CTO, David Schwartz, remarked on the ambiguity, saying he could make a case for why the SEC might appeal and why they probably won’t.

On the other hand, Bill Morgan, a prominent crypto attorney, is convinced that Ripple has no choice but to appeal the ruling that categorized ODL sales as investment contracts.

Following the court's August 8 ruling that XRP sales to institutional players for ODL use are considered securities transactions, Ripple may be faced with the need to either register XRP as a security or identify different ways to operate.

Fred Rispoli, a lawyer, suggests that neither side is likely to file an appeal. He believes that the appellate court would have to examine the evidence more thoroughly, potentially leading to a decision that doesn't favor the SEC. At the same time, Ripple has many issues it would rather not bring to light, making an appeal risky for both sides.

Ripple’s compliance with the court’s ruling would bring challenges to the integration of ODL, a technology with significant promise. The company has already established partnerships with banks in Asia and Europe to deploy ODL for international transactions, and MoneyGram is currently using this technology to enhance its payment speeds. Meanwhile, if the SEC does not pursue an appeal, the U.S. government will miss out on a potential $1.75 billion.

Will either party choose to extend this drama, or will they let it rest? In the next two months, we'll find out.

RLUSD: The current status

Ripple wasted no time after the favorable court ruling: the initiation of closed beta testing for its stablecoin on the XRP Ledger mainnet was announced immediately.RLUSD has yet to secure regulatory approval, meaning it is not currently available for purchase or trading. Moreover, it’s highly likely that regulators will postpone any official recognition of the stablecoin until the legal issues are completely settled.It’s worth noting that since the EU’s MiCA rules took effect in July 2024, only Circle has been able to secure authorization to issue and use USDC and EURC stablecoins. As such, don’t expect a swift resolution to Ripple’s stablecoin situation.

At this stage, we consider the testing to be more of a step in fulfilling the project’s roadmap than a swift move toward launching a competitive market product.

XRP ETF Launch: What to Expect

Ripple’s latest courtroom success against the SEC has greatly increased the odds of an XRP-focused ETF for indirect investments emerging this year. 

The court’s determination that Ripple’s token is not a security has made this outcome much more feasible. The founder of the crypto education platform Bitinning, Kashif Raza, voiced his optimism about XRP’s prospects in the ETF market, stating:

“XRP sales to institutions were a violation of securities law. Pay $125 million fine. XRP sales to retail was not a violation of securities law. Relief to the XRP community… You can expect XRP ETF applications soon.”

Nate Geraci, the President of ETF Store, backed this perspective, posing the question on X: “Wen XRP ETF?” 

Tony Edwards, who hosts the Thinking Crypto podcast, agrees that an XRP ETF could be on the horizon but stresses that this will only occur if XRP regains its bullish trend and is free from any further legal issues.

Navigating Politics: Ripple Labs' Strategic Approach

The campaign team for Kamala Harris initiated contact with representatives from Coinbase, Circle, and Ripple Labs.

The U.S. presidential candidate's agenda includes the creation of a balanced regulatory framework for the digital industry. Ripple CEO Brad Garlinghouse stated that he is open to collaboration and eager to be involved in drafting crypto legislation.Moreover, Gene Sperling, a former Ripple Labs board member with substantial XRP holdings, has declared his resignation from the role of economic advisor to Joe Biden, which he’s held since 2021, to become part of Kamala Harris’s team. 

So, Ripple’s founders have sided with the Democrats. If their gamble pays off and the SEC doesn’t bring down the hammer again, XRP supporters might finally experience a stratospheric ascent.