the Securities and Exchange Commission (SEC) has agreed to dismiss its high-profile lawsuit against Ripple Labs executives Brad Garlinghouse and Chris Larsen. The SEC had alleged that Ripple’s XRP cryptocurrency was an unregistered security, but after years of contentious litigation, the regulator moved to drop the case entirely on Thursday.
The dismissal averts the high-stakes trial that had been scheduled to begin in April 2024.
The sudden dismissal represents a major victory for the defendants and the broader cryptocurrency industry, which has long argued that XRP and other digital assets are more akin to commodities than securities. Just minutes after the news broke, the price of XRP surged almost 4% to above $0.50.
Ripple vigorously disputed the claims, arguing that XRP should be classified as a currency or commodity. The ensuing legal battle was closely watched by the crypto industry, as many feared an SEC victory could set a precedent for more securities regulation of digital assets.
The SEC vs. Ripple lawsuit began in December 2020 when the SEC accused Ripple of illegally raising more than $1.3 billion in an unregistered securities offering by selling XRP tokens to investors in the US and worldwide. Ripple argued that XRP should not be treated as a security, citing previous comments made by an SEC director. However, in July 2023, the court found that XRP was a security when sold to institutional investors, but not when sold to the public on an exchange. The SEC charged Ripple and two of its executives, Brad Garlinghouse and Christian Larsen, with selling unregulated securities valued at more than $1.3 billion to the public over the years via their company-offered XRP.
Thursday’s sudden conclusion to the saga signifies a major retreat for SEC Chairman Gary Gensler, who had made cracking down on crypto a priority. The turnabout also bodes well for other crypto firms contesting similar SEC lawsuits, including the recent action against the Kraken exchange over staking rewards.
With the SEC threat now lifted, Ripple will be free to resume XRP sales and expand its payments network in the lucrative US market. The price surge reflects renewed optimism that adoption of XRP will accelerate, now that its regulatory status is no longer in question.
Today’s bombshell end to the Ripple case demonstrates the power of pushing back against unreasonable SEC overreach into crypto markets. For Ripple and the industry at large, it’s a massive victory in the ongoing battle to establish sensible rules for digital currencies.
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