Ripple vs SEC Battle Might Finally Be Wrapping Up This Year

With settlement talks and a critical SEC meeting this week, the stakes are higher than ever for XRP. Here's a quick rundown of where things stand

The prolonged legal battle between Ripple and the SEC might finally reach its conclusion this year. With settlement talks ongoing and a critical SEC meeting on Thursday, the stakes are higher than ever for XRP.

Here's a quick rundown of where things stand, what's next, and why this week could be crucial for the crypto industry.

The SEC is planning to appeal a federal judge’s ruling that covered different legal classifications for the institutional and retail sales of the XRP token. The regulator is aiming to overturn the 2023 ruling, which stated that Ripple’s programmatic sales of XRP to retail customers did not violate securities laws, whereas its institutional sales did.

Earlier this year, the SEC filed an opening brief in its appeal against Ripple, arguing that all sales of XRP should be counted as unregistered securities. The regulator claims that Ripple’s marketing activities and statements to the public were meant to create profit expectations in the minds of those buying XRP, which in return rendered the token an "unregistered security" under federal securities law.

However, Ripple’s legal chief, Stuart Alderoty, downplayed these arguments, calling them "stale" and suggesting that they would be dropped by the next administration.

Both parties dropped appeals in March after a federal judge ruled that portions of the macroeconomic analysis in the case were inadmissible. The case began in December 2020 when the SEC sued Ripple for selling unregistered securities in a $1.3 billion fundraising effort that began in 2015.

The judge, Judge Torres, also held that institutional sales of XRP did violate securities laws but that programmatic sales to retail customers did not. The case had major implications for the crypto industry, with the ruling on public sales having the potential to set a precedent for other blockchain projects.

After a year of appeals and negotiations, Ripple and the SEC finally reached a settlement agreement, with the SEC agreeing to a reduced penalty of $50 million to close its case against Ripple. The $50 million fine is part of the $125 million that was set aside in a joint stipulation by both parties in May.

The case began in December 2020 when the SEC sued Ripple for selling unregistered securities in a $1.3 billion fundraising effort that began in 2015. The regulator claimed that Ripple’s founders, Christian SEgar and Jed McCaleb, sold XRP to raise money for the company while promising investors that the value of XRP would increase.

In March, both parties dropped appeals in the case after Judge Torres ruled that portions of the macroeconomic analysis in the case were inadmissible. The case is now heading toward a final resolution, with the SEC needing to make a new request for a partial summary judgment to adjust the ruling on the $125 million penalty and the ban on sales of XRP to big investors.

The SEC will need to clearly show that lifting the ban on XRP sales and lowering the penalty will benefit both big investors and the public. Only then will Judge Torres grant the request, which is a common practice in cases like this.

Investors are now awaiting the SEC’s next move, which could come as early as this week with a closed SEC meeting set for Thursday, May 22. A favorable ruling could also clear up things for an XRP ETF, which has been a hot topic of discussion in recent months. As the case progresses, it will be interesting to see how Judge Torres's decision impacts the future of crypto regulation in the U.S.