When you buy through affiliate links in our content, we may earn a commission at no extra cost to you. Learn 
While crypto’s most famous legal battle seems to have ended, the XRP news is not entirely positive, with SEC Chair Gary Gensler affirming in September 2024 his highly skeptical views on crypto.
Since December 2020, the crypto community has closely followed the U.S. Securities and Exchange Commission‘s (SEC) lawsuit against blockchain company Ripple Labs due to its broader implications on the industry.
On August 7, 2024, a US District Court ordered Ripple Labs to pay the U.S. SEC a fine of over $125 million as part of the final judgment.
Fans of XRP saw this as a win — the project can move on and continue with its goals without interference.
But even if the battle is won, Gensler still has issues with crypto.
Latest XRP News
Gensler gave a pointed speech on crypto regulations while speaking to CNBC on Wednesday, September 18, focusing on the need to protect retail investors.
With XRP the project that seems to attract most of Gensler’s ire, this has provoked fears that XRP may again appear in the spotlight for the wrong reasons.
Gensler told CNBC:
“We’re going to continue to try and protect the investing public. This [crypto] is a field that is rife with fraudsters and scammers and grifters — it just has been — and there’s nothing incompatible about the field with the basic protections that are the securities laws.
“Investors still need to have basic protections. If you look at the leading lights in this field in 2022 — just two years ago — a number of them are in jail, awaiting extradition, and tens of billions of dollars have been lost.
“So I would say that there’s a lot of clarity that’s called the U.S. securities laws that have worked for 90 years.”
Why is Ripple vs SEC Important to the Crypto Industry?
We have to go back to December 2020 to understand why the entire crypto industry closely followed the SEC’s lawsuit against Ripple Labs.
At the time, the SEC under former chairman Jay Clayton sued Ripple Labs (PDF), its co-founder Christian Larsen, and its CEO Bradley Garlinghouse for raising over $1.38 billion in an “illegal securities offering” of XRP tokens.
Naturally, crypto watchers were fixated on the outcome of the lawsuit.
If XRP were to be labeled a security and not a currency by the court, it would give the SEC a blueprint for labeling other cryptocurrencies as securities as well.
The prolonged legal process saw the SEC and Ripple Labs go back and forth with each other. Among the highlights of the case was the release of the “Hinman Documents.”
The Hinman documents refer to a series of internal emails between William Hinman, former Director of the SEC, and other SEC executives. The emails discussed Hinman’s 2018 speech when he declared that “sales of Ether (ETH) are not securities transactions.”
The emails showed (PDF) SEC executives discussing how Hinman could appear “stronger” in declaring that Ethereum is not a security.
Is XRP a Security or Not?
The answer to the question is not straightforward.
The SEC had alleged that Ripple Labs had sold “unregistered” XRP tokens in three categories:
- Sales to institutional investors worth $728 million
- Programmatic sales on crypto exchanges to retail investors worth $757 million
- Other Distributions: SEC claimed that Ripple funded third parties to sell XRP worth $609 million in public markets
XRP Sales to Institutional Investors ‘Were Securities’
In 2023, a U.S. District Court concluded that XRP sales to institutional investors were “unregistered offers and sales of investment contracts.”
The court cited the Howey Test, which notes that “an investment contract is a contract, transaction, or scheme whereby a person invests their money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”
The court found that institutional investors “purchased XRP with the expectation that they would derive profits from Ripple’s efforts.”
Furthermore, the court concluded that institutional investors bought XRP as an investment rather than for consumptive purposes.
Lockup provisions and resale restriction conditions also proved that institutional sales of XRP were unregistered securities offerings.
XRP Programmatic Sales to Retail Were Not Securities
However, the court concluded that XRP tokens bought by retail investors from crypto exchanges were not “investment contracts.”
The court reasoned that:
- Retail investors bought XRP on exchanges without knowing you were receiving the funds.
- Ripple did not make any promises or offers to retail investors. There was no evidence of Ripple’s promotional materials — widely circulated among institutional buyers — being distributed to the general public.
The court also found no evidence that “Other Distributions” were sold as investment contracts.
What’s Next for Ripple?
CEO Garlinghouse called the court ruling “a victory for Ripple, the industry, and the rule of law.”
He said:
“The SEC’s headwinds against the whole of the XRP community are gone.”
With the SEC lawsuit behind it now, could XRP finally scale new all-time highs again? It has been over seven years since XRP hit a peak of $3.84 on January 4, 2018.
Coinbase market data showed that since January 2018, Bitcoin (BTC) has breached multiple all-time highs — $64,899 in April 2021, $69,000 in November 2021, and $73,750 in March 2024.
In 2024, Ripple plans to launch a fully collateralized stablecoin to support the growth of its public blockchain. XRP Ledger. Ripple expects the native stablecoin to synergize with the XRP token to improve payment solutions and customer experience on the XRP Ledger.
However, a section of the crowd believes that a native stablecoin on the XRP Ledger will bring the “death of XRP” by replacing it as the asset that facilitates cross-border payments.
The Bottom Line
Ripple is one of the oldest cryptocurrencies in the world, ideated in 2011 by co-founder Jed McCaleb.
Once valued more than Ethereum (ETH), Ripple’s XRP has fallen behind newer crypto projects such as Solana (SOL) and Binance Chain (BNB).
Could this be the break of a new dawn for Ripple and XRP?
