Ripple v. SEC: How Will New Developments Affect XRP Price?

Ripple Labs, originally called OpenCoin, was founded to create a decentralized system for fast and cheap transactions, connecting digital assets to traditional finance using XRP. Unlike Bitcoin, Ripple uses a unique consensus algorithm that relies on bank-controlled validators. In 2020, the SEC sued Ripple, claiming that XRP was an unregistered security.

 The court later ruled that XRP was not a security for retail sale but found institutional sales to be a violation. With the new crypto-friendly SEC administration, Ripple is hoping for regulatory clarity and has called on the agency to drop the case brought by former SEC chairman Jay Clayton. Hot Stories Bitcoin is vital to the prosperity of the American nation: Michael Saylor Ripple CTO: ‘We could offer an XRP-only system if we wanted’ Breaking: Ripple secures key UAE license Fidelity: All eyes on Bitcoin’s support of $70,000 Full timeline of the SEC vs. Ripple case The legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC) began on December 22, 2020, when the SEC accused Ripple CEO Brad Garlinghouse and co-founder Chris Larsen of conducting an unregistered securities offering by selling XRP. 

The SEC said Ripple raised $1.3 billion by selling XRP, and argued that the company’s control over the supply and promotion of XRP meets the Howey test for a security. Ripple has denied the allegations, saying that XRP is a digital currency, not a security. The main factor in this case was Ripple’s unique structure. Unlike decentralized cryptocurrencies such as Bitcoin, Ripple operates a network of bank-controlled servers to verify transactions, and the entire 100 billion XRP token supply is pre-mined. Advantages of XRP Bitcoin Fast settlement in 3-5 seconds Settlement in 500 seconds Low cost $0.0002/tx $0.50/tx Scalable 1500 transactions per second 3 transactions per second The SEC argued that Ripple’s continued control over the XRP supply and active promotion of its price made XRP a security that required proper registration. On July 13, 2023, Judge Analisa Torres issued a mixed decision that provided regulatory clarity. 

The court ruled that XRP is not a security in itself, providing relief to retail investors. However, the judge ruled that Ripple’s institutional sales of XRP constituted securities transactions, highlighting the importance of the sale and marketing of digital assets. Following this decision, on August 7, 2024, the court imposed a civil penalty of $125 million on Ripple for violations related to institutional sales. However, the SEC’s request for profit recovery and additional interest on the judgment was denied. Additionally, Ripple was prohibited from violating securities laws in connection with institutional sales in the future. The case was a turning point in cryptocurrency regulation, setting a precedent for the classification of digital assets under US securities laws. New SEC Appeal The legal battle escalated when both Ripple and the SEC filed appeals on October 3, 2024, and moved the case to the Second Circuit Court of Appeals. In January 2025, the SEC filed its opening statement, arguing that the District Court erred in holding that Ripple’s XRP sales did not meet the Howey test’s profit and money investment requirements. The agency is seeking to overturn the decision that secondary market sales of XRP were not securities transactions.

Ripple’s chief legal officer Stuart Eldrothy dismissed the SEC’s arguments as duplicitous and irrelevant amid a changing regulatory environment. The company is optimistic that the case could be dismissed under the leadership of crypto-friendly SEC Acting Chairman Mark Uyeda. In response, Ripple filed a counter-appeal in October 2024, with a deadline of April 16, 2025. The agency has suffered multiple setbacks from the lawsuit filed by former SEC Chairman Jay Clayton. As the SEC continues its appeal, its commitment to the case remains uncertain. The core of the SEC’s appeal is its challenge to a district court ruling that classified Ripple’s institutional sales of XRP as securities transactions, but ruled that secondary market sales and XRP itself were not securities. New Hope Republican SEC Commissioner Mark Uyeda has been appointed the agency’s Acting Chairman. A vocal critic of the SEC’s previous “regulation through enforcement” approach, Ueda previously called it a “disaster” for the crypto industry. In December, he predicted a shift toward this.