It’s common knowledge that Ripple Labs is embroiled in an uncomfortable lawsuit with the Securities and Exchange Commission (SEC), and although the case is continuing to move forward, it’s been an uncomfortable couple of years for XRP investors and the company alike.
As of early-mid 2022, it appears that the SEC is on the back foot, but the combination of the government agency’s delaying tactics and the lengthy nature of the judicial process, the end is still an uncomfortable distance away.
As well as being a thorn in Ripple’s side since December 2020, the price of XRP, Ripple’s cryptocurrency, has seemingly stagnated for the past year and a half, leading to many in the space jokingly referring to it as a stablecoin. Many of the biggest trading and investment platforms – Coinbase and Crypto.com included – suspended trading of the XRP token following the Security and Exchange Commission’s announcement, and despite Ripple seemingly being on track to win (or at least accept a settlement offer on) the case, there has been no indication as to when trading will resume.
During this period of uncertainty, therefore, is it still possible to buy XRP, and should you invest in a cryptocurrency that’s fighting against the SEC?
Ripple and XRP
To know whether XRP is a good investment, it’s important to understand what the company – and, by default, its cryptocurrency – has to offer. Ripple, founded by Chris Larsen and Jed McCaleb in 2012, is a blockchain-based digital payments network that aims to allow various financial institutions, including governments, to manage and tokenize value. The company’s primary aim is to provide greater economic opportunity for individuals and businesses worldwide. Ripple functions predominantly as a payment remittance system, much like SWIFT, allowing third parties to complete international money and security transfers across multiple currencies.
XRP, Ripple’s cryptocurrency, runs on the XRP Ledger (XRPL), a decentralized, public blockchain. Ripple designed XRP to be the most practical cryptocurrency for use within the financial services industry. XRP can be used to bridge two currencies, enabling faster and more affordable cross-border transactions, with transactions using XRP only costing a fraction of a cent on average. Central Banks can also utilize XRP and the XRPL for secure and flexible solutions regarding the issuance and management of digital currencies.
Why has the SEC sued Ripple?
The Security and Exchange Commission alleges that Ripple Labs conducted an illegal securities offering through sales of its cryptocurrency, XRP. The SEC claims that Ripple and two of its executives, Christian Larsen and Brad Garlinghouse – significant security holders – raised over $1.3 billion through an unregistered and ongoing digital asset securities offering to investors both in the US and worldwide.
A security is a traded financial instrument that represents ownership in a company or corporation but has no utility. The SEC states that Ripple executives held an initial public offering (IPO) of XRP, which was an unregistered security at the time, and these XRP tokens were used to fund Ripple’s platform. As per the SEC’s requirements, securities must be registered with the Security and Exchange Commission to protect the interests of investors and combat fraud.
Who will win the SEC vs Ripple lawsuit?
In the past, the SEC has settled the majority of its lawsuits; it’s widely expected that companies will hold their hands up, admit fault, and pay any penalties in order to continue with their business. Ripple, on the other hand, took the decision to engage in a legal battle with the Commission, claiming that they were never given notice or warning from the SEC prior to the government agency bringing forth the lawsuit. Ripple’s lawyers also argued that the SEC is biased towards certain cryptocurrencies, suggesting that some SEC members have previous and ongoing links to other crypto platforms, Ethereum included. The SEC has previously given Ethereum a pass on securities legislation whilst simultaneously suing Ripple.
It’s impossible to know definitively who will win the SEC vs Ripple lawsuit. The SEC is undeniably on the backfoot, having spent recent months trying to delay proceedings as much as possible, refusing Ripple access to documents that Ripple’s lawyers consider essential to the case.
In April 2022, the judge presiding over the case denied an SEC motion that claimed a set of emails and draft versions of a speech by ex-SEC Director William Hinman should be considered privileged information. It’s generally believed that these documents, once released, will contain evidence of improper conduct by SEC officials regarding Ripple and its XRP token.
At the end of April, both parties agreed to conclude the briefing schedule before Christmas. Any motions for summary judgment and motions to exclude expert testimony must be filed by the beginning of August, and oppositions to any motions for summary judgment and responses to motions to exclude expert testimony must be filed by the beginning of November. Replies to any opposition must then be filed by December 20th, 2022.
The general consensus amongst experts and XRP investors alike is that the Security and Exchange Commission and Ripple Labs will agree to a settlement, which would widely be considered an unofficial victory for Ripple, as it would suggest that the SEC is unable to prove that Ripple was indeed involved in the sale of unregistered securities.
Is it still possible to buy XRP during the SEC lawsuit?
Regardless of how well Ripple is faring in the lawsuit, many platforms are still wary of offering users the ability to buy or trade XRP. Most cryptocurrency exchanges that are allowed in the United States will not list XRP until the investigation has concluded.
It is still possible to buy or trade XRP on eToro, Bitstamp, Kraken, Liquid, and Binance, although US-based users will not be able to do so, even on platforms where XRP is still purchasable.
Binance, however, announced earlier in 2022 that they would offer Wrapped XRP to US investors. Wrapped XRP is a token pegged to XRP that can be used on blockchains other than the XRPL. The wrapped asset is exchangeable 1:1 with XRP and is a way of encouraging and allowing users to trade in the same way that they would with the genuine XRP token.
