The Ripple Labs vs SEC legal battle has been a focus point for crypto enthusiasts. The temporary court ruling in favor of Ripple has filled crypto enthusiasts with hope of a brighter future for cryptocurrency.

Since late 2020, the battle has been a vigorous display of legal expertise and sheer enthusiasm for cryptocurrency. SEC’s-US Securities and Exchange Commision accusation of Ripple executives being wrong to sell $1.3 billion worth of XRP as unregistered security offerings has been temporarily shattered.

However, both the SEC and Ripple Labs have reached a win-win situation as the court ruled the authority over institutional sales to the SEC; at the same time, purchases on exchanges were not considered as an institutional securities offering.

SEC vs XRP and The Crypto Regulation

This legal battle may mean little to the non-crypto population. However, such a massive legal move against an ICO – Initial Coin Offering has sent chills down the spine of every crypto enthusiast.

It was obvious that at some point in the future, regulatory authorities would interfere with the crypto domain, but the SEC vs Ripple battle was of such proportion that it has to be said the SEC made the dreaded entrance even more dramatic.

To sell an asset as an institutional securities offering, it needs to be registered with the SEC. This is a costly and time-intensive process, which is one reason why crypto companies often try to make unregistered sales.

What is important for the crypto community is to see whether Ripple Labs will yield to the threats posed by the SEC and get itself registered.

Timeline of the Legal Battle

On 22nd December, 2020, the SEC proceeded to court challenging the legality of the unregistered securities offerings and the funds raised through selling XRP – the coin of the XRPL- blockchain(XRP Ledger).

Cases were filed against the company and two of its executives, Brad Garlinghouse and Christian Larsen. This is reported in a December 2020 press release by the SEC.

The allegations included sales of XRP for funding the business from a period of 2013 were conducted as unregistered securities sales, but in the form of a cryptocurrency. There are two main takeaways here: first, the SEC’s allegation implies that it does not condone the decentralized nature of operations, and second, it does not identify XRP as a valid asset.

With validity and decentralization both being questioned, this case became a battle outside the court between those who support Ripple and those who do not.

On 13th July, 2023, a court ruling came, the core idea that this ruling represented includes the following:

1. XRP or any other cryptocurrency, for that matter, does not fall under the purview of securities when sold to the public through dedicated crypto-exchanges.
2. When the same cryptocurrency is sold to institutional investors, it does become susceptible to regulations by relevant authorities.

With the win-win situation achieved and Ripple willing to pay a $125 million fine to the SEC, the department has dropped the case, and only final paperwork remains.

Implications of The Case

A regulatory authority in hot pursuit was not a good track record for Ripple Labs. But the court ruling of 13th July, 2023, actually put them in a better position. In doing so, through the court order, Ripple was able to provide clear instructions about all cryptocurrencies and the legal limits of their applications.

This case has sparked widespread debate as to whether a decentralized financial asset should be allowed such a level of freedom. The two sides kept their arguments strong as usual, but the court ruling had a significant impact.

First, the identity of a cryptocurrency in an exchange was approved without question. This is a huge win for the crypto community, as exchange-based trading is one of their primary interests.

Second, even though the case was about XRP and Ripple Labs, it was extended beyond those two entities and addressed the whole cryptocurrency ecosystem.

The Future

The future carries with it an uncertainty, as always. But the SEC-approved Ethereum and Bitcoin trading assets on the ETF market are proof of hope that crypto and regulatory systems can coexist without clashing head-to-head all the time.

As far as Ripple Labs is concerned, the SEC has dropped the case upon reaching a mutual agreement where Ripple will pay a civil penalty of $125 million, and $50 million of it will go to the commission.

Conclusion

The SEC is a major regulatory authority, and falling short of their likeness is not a good track record to begin with; however, in the case of XRP and Ripple Labs, this case has proved beneficial as they could secure a win that is significant not just to them, but to the whole community of crypto enthusiasts.

Post this major plot twist, we can hope that government agencies will look at this matter with more diligence and will make policy changes to fit cryptocurrency into the domain of general trading, which is overlooked by them.

This is yet another win-win situation, as the structural identity of decentralization is not questioned, and yet, crypto becomes legally accessible to everyone.

FAQs

Cryptocurrencies or their developers and beneficiaries cannot be penalized for trades conducted on exchanges, but they are regulated when it comes to institutional investors.

The general public can access the cryptocurrency for regular trading on exchanges. The legality of that action is not questioned.

The ripple consensus protocol, which is instrumental to the blockchain, cannot exist without XRP.

Ripple is used extensively for cross-border fund transfers, which were traditionally achieved by SWIFT.

Ripple has many advantages on offer for cross-border fund transfer when compared to SWIFT. Ripple has seen a rise in demand over SWIFT, yet it is uncertain to state that Ripple will replace SWIFT.