In a monumental turn of events, the U.S. Securities and Exchange Commission (SEC) has agreed to drop all charges against top executives of the blockchain company Ripple Labs.
The SEC had accused Ripple CEO Brad Garlinghouse and co-founder Chris Larsen of violating investor-protection laws by selling over $1.3 billion worth of XRP tokens without registering them as securities. However, after nearly three years of litigation, the SEC has now conceded to dismissing the allegations against the two individuals.
- The SEC has dropped securities violation charges against Ripple’s CEO Brad Garlinghouse and co-founder Chris Larsen. This is a major victory for Ripple after a nearly 3 year legal battle with the SEC.
- On Thursday, the cryptocurrency XRP registered its biggest single-day percentage gain (6.5%) in 3 months following this news. The price jumped to 53 cents from 50 cents.
- The SEC had previously alleged Ripple raised $1.3 billion through unregistered XRP sales. A court ruled in July that XRP itself is not a security.
- The SEC will meet with Ripple to discuss potential remedies related to Ripple’s institutional XRP sales that violated Section 5. Ripple called the SEC’s move a “surrender.”
- Garlinghouse criticized the SEC for diverting attention from offshore exchanges to target individuals building regulated businesses in the US. Larsen questioned the SEC’s motivation and abuse of power.
- The case sets an important precedent on how cryptocurrencies are classified as securities. The regulatory framework remains complex.
- Some speculate the SEC dropped charges as a legal tactic to appeal the Ripple decision sooner rather than wait until the end of the trial.
The move follows a significant legal victory for Ripple in July 2022, when a judge ruled that XRP should be considered a currency rather than a security. Consequently, Ripple did not have an obligation to register XRP sales with the SEC. This verdict led to a surge in XRP’s price, which registered a 6.5% single-day gain on Thursday – the highest daily increase for the token in over three months.
For Garlinghouse and Larsen, the SEC’s decision to drop charges comes as a relief after years of strain battling allegations they decried as “baseless.” Garlinghouse criticized the regulator for diverting focus away from offshore exchanges rife with illegal activity and instead targeting US-based companies trying to build accountable businesses.
Meanwhile, Larsen raised concerns over the motivation behind the SEC’s pursuit, suggesting it was an overextension of power. With the dismissal of charges, both executives have been vindicated after enduring immense personal and professional turmoil.
Broader Implications for the Crypto Industry
The outcome of the high-stakes legal clash between Ripple and the SEC is also monumental for the wider cryptocurrency landscape. One of the core issues at stake was determining which digital assets qualify as securities and are thereby subject to disclosure laws.
With the SEC still working to establish a clear framework for crypto regulation under Gary Gensler’s leadership, this case demonstrates the complexities in classifying different assets. The regulator’s concession that XRP falls outside the scope of a security indicates other prominent tokens, like Bitcoin and Ethereum, are unlikely to face securities regulation either.
Nonetheless, the SEC emphasized it will continue discussions with Ripple on appropriate remedies for the company’s institutional XRP sales that violated Section 5 laws. While a major reprieve, Ripple still faces potential penalties for those transactions made directly to financial institutions.
The way forward will depend on whether Ripple can reach an acceptable settlement with the SEC. In the meantime, the company remains focused on pushing for sensible legislation to guide crypto innovation in the US.
According to legal experts, the SEC’s move to drop charges at this stage may also serve as a strategic maneuver to expedite appeals in the ongoing litigation. By removing the charges against individuals, the regulator can appeal the classification of XRP sooner rather than waiting until after a full trial concludes.
Therefore, while Ripple can claim vindication for now, the legal saga is likely far from over. However, the latest development firmly establishes a precedent that will help shape cryptocurrency regulation at a defining moment for the industry.
For XRP investors, the token’s long-term prospects appear brighter without the cloud of uncertainty that has loomed throughout its legal battle with the SEC.