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Ripple Will Consider an IPO After the SEC Lawsuit Ends

Ade Hennis - Author
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May 26 2022, Published 8:26 a.m. ET

The lawsuit between Ripple and the SEC is still ongoing, and an end doesn’t seem near. However, the crypto maker will consider an IPO after the case is over. Here's what we know about Ripple's potential IPO.

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After the lawsuit is over, Ripple might be forced to register the sale of its cryptocurrency, XRP, as a security. While the crypto company doesn’t want that, it could give retail investors more investment opportunities. They would have the opportunity to invest in Ripple stock and XRP securities.

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Ripple plans to consider an IPO.

Ripple CEO Brad Garlinghouse expects the lawsuit with the SEC to end towards the end of the year. When the lawsuit ends, the company plans to explore options for going public. The SEC has accused Ripple, Garlinghouse, and executive chairman Chris Larsen of illegally offering securities through the sale of XRP. The lawsuit has been going on for nearly 15 months. It was one of the first cases where the SEC struck down on crypto.

Neither the SEC nor Ripple are necessarily winning the lawsuit at this point and both parties have taken blows throughout the case. Ripple wanted to dismiss the SEC’s accusation of it enabling the sale of unregistered securities through XRP, but the judge denied the motion. The judge didn't dismiss the motion of Ripple accusing the SEC of failing to give ample notice that the sale of XRP would violate security regulations.

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Former SEC commissioner Joseph Grundfest claimed in an interview that the lawsuit is a lose-lose situation for the SEC because it will still have many problems even if it wins the case. With many cryptocurrency firms supporting Ripple, it's reasonable to see why the SEC could be in a possible lose-lose scenario. In Ripple’s case, losing the lawsuit could open up the possibility of the agency coming after other crypto issuers, exchanges, and payment companies.

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The SEC already threatened Coinbase with a lawsuit if the company went forward with its yield program because it would count as a security. Coinbase denied the accusations. Other yield protocols have shut down or paused their operations amid fears that the SEC would serve them with a lawsuit. There's still confusion about what the SEC considers securities and non-securities. The agency doesn't consider Bitcoin to be a security, but it sees other cryptocurrencies as securities.

Could Ripple opt for a SPAC merger?

Ripple would have to file with the SEC to go forward with an IPO, and with the two entities currently in a heated court case, the crypto company could face issues going that route. If Ripple loses the case, it could struggle to find investors. Retail investors might be skeptical once the company goes public because of the legal battles it has faced.

Companies that have faced legal and ethical troubles in the past usually opt for a SPAC if they want to go public. Ripple may take an easier path to go public with that type of merger. WeWork is one company that had to halt its IPO plans because of concerned investors, so it opted for a SPAC.

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