Ripple, the company behind the XRP cryptocurrency, has been locked in a legal battle with the U.S. Securities and Exchange Commission (SEC) since December 2020. The SEC alleges that Ripple and its executives sold XRP as an unregistered security, violating federal laws. Ripple denies the charges and argues that XRP is a digital currency, not a security.
The lawsuit has significant implications for the crypto industry, as it could set a precedent for how regulators treat other digital assets. Ripple has gained some allies in its fight, including Coinbase, the largest U.S. crypto exchange, and the Chamber of Commerce, a leading business advocacy group.
Coinbase’s Parallel Case Against the SEC
Coinbase is facing its own legal challenge from the SEC over a product called Lend, which would allow users to earn interest on their crypto holdings. The SEC claims that Lend involves the sale of securities, and has threatened to sue Coinbase if it launches the product.
Coinbase has publicly criticized the SEC’s actions, saying that the agency has not provided clear guidance on what constitutes a security in the crypto space. Coinbase’s CEO Brian Armstrong accused the SEC of “sketchy behavior” and “intimidation tactics” in a series of tweets in September 2021.
Coinbase has also expressed support for Ripple in its lawsuit, saying that it shares Ripple’s vision of creating an open and decentralized financial system. In January 2021, Coinbase suspended trading of XRP on its platform, following the SEC’s lawsuit. However, in October 2021, Coinbase filed a motion to intervene in the case, arguing that it has a stake in the outcome and that it can provide relevant information to the court.
Coinbase’s motion states that “the SEC’s claims against Ripple are based on novel and unprecedented theories of securities law liability that threaten not only Ripple and XRP holders like Coinbase but also countless other digital asset market participants.” Coinbase also claims that the SEC’s lawsuit has caused “irreparable harm” to XRP holders and the crypto industry as a whole.
The Chamber of Commerce’s Amicus Brief
The Chamber of Commerce is another influential organization that has sided with Ripple in its lawsuit. The Chamber of Commerce is a non-profit group that represents more than three million businesses across various sectors and industries. The group advocates for pro-business policies and regulations at the federal, state, and local levels.
In November 2021, the Chamber of Commerce filed an amicus brief in support of Ripple’s motion to dismiss the SEC’s lawsuit. An amicus brief is a legal document that allows third parties to offer their opinions or perspectives on a case. The Chamber of Commerce’s brief argues that the SEC’s lawsuit against Ripple is “unprecedented and unwarranted” and that it creates “uncertainty and confusion” for the crypto industry.
The brief also states that “the SEC’s expansive interpretation of what constitutes an ‘investment contract’ under the securities laws threatens to stifle innovation and economic growth in the emerging blockchain and digital asset space.” The Chamber of Commerce urges the court to dismiss the SEC’s lawsuit and to provide clear and consistent rules for the crypto industry.
The Potential Impact of Ripple’s Lawsuit
Ripple’s lawsuit with the SEC is expected to conclude by early 2023, according to a recent update from Ripple’s lawyer. The case could have a significant impact on the future of XRP and other cryptocurrencies, depending on how the court rules.
If Ripple wins the case, it could clear XRP from being labeled as a security and allow it to resume trading on major platforms like Coinbase. It could also boost XRP’s price and adoption, as well as set a positive precedent for other crypto projects facing similar regulatory scrutiny.
If Ripple loses the case, it could face hefty fines and penalties from the SEC, as well as potential lawsuits from XRP holders who claim they were misled by Ripple. It could also damage XRP’s reputation and market value, as well as create a negative precedent for other crypto projects that could be deemed as securities by the SEC.
Regardless of the outcome, Ripple’s lawsuit with the SEC is likely to shape the future of crypto regulation in the U.S. and beyond. As more crypto companies and organizations join forces with Ripple, they are sending a message to regulators that they want clear and fair rules for the crypto industry.