Investors are eager to know if Ripple or the SEC is going to win. Regardless of the outcome, the case will have a lasting impact on the crypto sector.
The latest on the XRP-SEC lawsuit
In a major blow to the SEC, district court judge Analisa Torres has denied the motion to dismiss a key Ripple defense argument. Ripple argued that the SEC failed to give it ample notice that the sale of XRP would violate its securities regulations, and the SEC rejected Ripple’s argument and asked Torres to strike it out. The SEC explained that the notice it has given other companies issuing cryptocurrencies was enough for Ripple.
But the judge refused, allowing Ripple to carry on with its important defense against the regulator. Ripple CEO Brad Garlinghouse celebrated the denial, calling it a “huge win.”
Ripple has also had its fair share of setbacks. The judge denied a motion by the startup’s executives to strike down an SEC argument that they had enabled the sale of alleged unregistered securities in the form of the XRP token.
Another important update in the Ripple-SEC lawsuit is former SEC commissioner Joseph Grundfest sharing his take on the matter. In a YouTube interview, Grundfest revealed that he questioned the SEC’s decision to sue Ripple. He was particularly concerned about the timing and implications of the lawsuit.
According to Grundfest, the case will be a lose-lose situation for the SEC. If Ripple prevails, the SEC will be left weakened, and if the SEC wins, the regulator will still have many problems.
The Ripple-SEC lawsuit, explained
In 2020, the SEC sued Ripple, accusing the company and its executives of violating its securities rules. The regulator holds that, as XRP is a security, any XRP sales need to be registered with the SEC. Ripple didn’t do that, however, because its executives believe XRP is a currency.
Ripple sold about $1.3 billion in XRP in capital-raising efforts between 2013 and 2020, and its executives sold an additional $600 million in XRP. The SEC wants the proceeds of the XRP sales surrendered and Ripple executives blocked from any future token sales.
Meanwhile, Ripple is fighting both to clarify that XRP isn’t subject to the SEC oversight and to avoid having to turn over the XRP sales proceeds to the SEC. The crypto community is mostly behind Ripple in this case, believing its victory would reduce regulatory troubles for the sector.