In a significant turn of events, the U.S. Securities and Exchange Commission (SEC) has decided to drop its claims against two key figures at Ripple Labs, CEO Brad Garlinghouse and co-founder Chris Larsen.
The Lawsuit
The SEC's lawsuit, which was initiated in December 2020, centered on the assertion that Ripple Labs had unlawfully raised more than $1.3 billion through an unregistered securities offering, involving the cryptocurrency XRP.
The legal battle between Ripple and the SEC has been characterized by a series of twists and turns. One pivotal moment occurred in July when U.S. District Judge Analisa Torres granted Ripple a partial victory. She ruled that sales of XRP on public exchanges did not equate to unregistered securities offerings. Additionally, Torres rejected the SEC's request to appeal this decision. Nevertheless, the SEC did achieve some success as the judge found that the sale of $728.9 million worth of XRP to hedge funds and investors had indeed violated the law. The SEC's allegations against Garlinghouse and Larsen, pertaining to their involvement in these sales, were scheduled to be resolved through a jury trial.
Throughout the case, both Brad Garlinghouse and Chris Larsen have been vocal critics of the SEC's approach. They have consistently argued that the SEC was pursuing a political agenda, aiming to, in Larsen's words, "suffocate crypto in America."
Garlinghouse pointed out that the SEC chose to focus on individuals like him and Chris Larsen instead of addressing illicit activities conducted on offshore exchanges, hinting at the ongoing trial of Sam Bankman-Fried, the founder of the crypto exchange FTX, who is also facing an equally lengthy legal battle. Testimony during that trial has alleged that some of these funds were used for political donations.
The SEC has not provided any comments on this recent development, but it indicated in the court papers that the next step in the case is for both parties to present their arguments to the judge concerning the appropriate penalties for Ripple.
Judge Torres' ruling in July was seen as a rare setback for the SEC in its ongoing efforts to regulate the cryptocurrency industry. Under the leadership of Chairman Gary Gensler, the SEC has filed lawsuits against major cryptocurrency platforms, including Binance and Coinbase, arguing that many digital assets should be classified as securities and therefore fall under the SEC's regulatory authority.
As for Ripple, this recent development signals a significant moment in its multi-year legal struggle. The SEC's dismissal of claims against Garlinghouse and Larsen might be an attempt to expedite the judicial process, given that their trial was scheduled for the spring and would have locked in the SEC's position regarding institutional investors. The fact that the SEC voluntarily dismissed the case with prejudice, meaning it cannot be filed again, could indicate various things. It might suggest that the SEC knew it didn't have a strong case or wanted to focus on a different legal matter. Either way, it represents a notable moment in the SEC's ongoing efforts to regulate the cryptocurrency industry.
The Positives
However, this positive development in the legal battle is just one facet of Ripple's activities and recent developments. One notable event that has recently fuelled speculation is a recent job posting for the position of “Shareholders Communication Senior Manager.” This posting has led to conjecture that Ripple might be considering an initial public offering (IPO) in the future.
Additionally, the Ripple community is gearing up for the Ripple Swell conference, scheduled for November 8-9. This prominent gathering features diverse speakers, including Brad Garlinghouse, and is expected to address a range of topics within the crypto space.
In the broader context of the ongoing legal battle and regulatory environment, these developments reflect the lack of clear and comprehensive regulations for cryptocurrencies in the United States, which has resulted in multiple ongoing disputes between the SEC and crypto companies. However, while these legal battles continue, the SEC seems to be slowly getting pushed back.
While Ripple isn’t quite out of the woods just yet, hopefully this winning streak keeps going to bring an end to this multi-year legal battle, and along with it some regulatory clarity for the crypto space.