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 violations in institutional sales.

With the new crypto-friendly SEC administration, Ripple is hoping for regulatory clarity and has called on the agency to drop the case brought under former SEC chairman Jay Clayton.

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 alleges that Ripple raised $1.3 billion through the sale of XRP, and argues that the company's control over the supply and promotion of XRP meets the Howey test for securities. Ripple denies the allegations, saying that XRP is a digital currency, not a security. The key factor in this case is Ripple's unique structure. Unlike decentralized cryptocurrencies like Bitcoin, Ripple operates a network of bank-controlled servers to verify transactions, and the entire 100 billion XRP token supply is pre-mined.