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Brad Garlinghouse, the Chief Executive Officer of Ripple, addressed attendees at the 2022 Milken Institute Global Conference in Beverly Hills, California, on May 4, 2022.
Mike Blake | Reuters
The long-standing conflict between the Securities and Exchange Commission (SEC) and the cryptocurrency sector seems to have reached a conclusion.
This development unfolded on Wednesday when Ripple publicly announced that the SEC had officially withdrawn its lengthy legal battle dating back four years. The lawsuit, initiated on the final day of Jay Clayton’s tenure as SEC chair, accused Ripple of generating $1.3 billion via the sale of its XRP token without formally registering it as a security.
Other crypto firms and platforms such as Coinbase, Kraken, Robinhood, Binance, and OpenSea have previously experienced lawsuits or inquiries that were either resolved or adjourned. Following this latest announcement, Ripple is celebrating what it considers a significant victory.
“Ripple is unique in that it actively resisted the SEC’s encroachment and emerged successful on pivotal legal issues, significantly complicating the SEC’s plans to undermine the cryptocurrency ecosystem in the U.S. through enforcement actions,” commented Ripple’s Chief Legal Officer, Stuart Alderoty, in an email to CNBC. “Now, the SEC has retreated from its appeal in our case. Ironically, Ripple was the first major lawsuit they initiated and is now the last one they are abandoning.”
Established in 2012, XRP is one of the premier cryptocurrencies that emerged following Bitcoin. It was developed by the creators of Ripple to serve as the native currency on the platform. Retail investors can also buy and sell XRP, which saw a rise of approximately 11% following the latest announcement.
Ripple invested around $150 million in its legal defense against the SEC, particularly during a tense confrontation with former Chair Gary Gensler, who was often criticized for his adversarial stance toward the crypto industry. In July 2023, a federal judge ruled that XRP is “not necessarily a security on its face,” undermining the SEC’s assertions and giving Ripple a crucial advantage.
This victory marked not only a crucial win for Ripple but also indicated a significant shift for the broader crypto landscape, revitalizing momentum that contributed to Donald Trump’s return as a prominent political figure. A year following the judge’s decision, Trump, now a Republican candidate, delivered a keynote at the annual Bitcoin Conference, proclaiming efforts to transform the U.S. into the world’s leading hub for cryptocurrency and a powerhouse in Bitcoin.
Ripple and its fellow crypto enterprises were among the substantial financial backers of Trump’s campaign, and the administration has demonstrated an inclination to reciprocate this support in various ways since taking office.
A New Regulatory Era
This past Friday, the SEC hosted its inaugural significant crypto roundtable, marking a potential shift toward a regulatory approach centered on collaboration rather than enforcement. This initiative is spearheaded by Hester Peirce, who is leading the SEC’s newly formed Crypto Task Force.
Peirce has conveyed a message that the SEC aims to be a partner to the cryptocurrency industry, aiming to provide a transparent and lawful regulatory environment for its operations.
In a notable policy change, the SEC rescinded Staff Accounting Bulletin 121, which mandated that banks categorize cryptocurrency assets as liabilities on their financial statements. This regulation, introduced in 2022 under Gensler’s leadership, was perceived as a significant impediment to institutional adoption of digital currencies.
“Farewell to SAB 121! It hasn’t been enjoyable,” Peirce remarked on X following the announcement of this transition in January.
During the recent World Economic Forum in Davos, Switzerland, executives from Goldman Sachs, Morgan Stanley, and Bank of America indicated that the easing tensions in Washington could lead to renewed opportunities for engagement with cryptocurrencies.
At the White House, David Sacks, who has been appointed by Trump to oversee AI and cryptocurrency initiatives, joined the president during the signing of an executive order related to digital assets. Sacks had recently attended a high-profile crypto event where he stated, “The conflict with crypto is over.”
In February, Coinbase’s lawsuit was dismissed, followed closely by Kraken’s. The SEC also pulled back from its investigation into Robinhood’s crypto division, and inquiries into Binance are currently on hold.
Ripple’s legal representatives consistently argued that the SEC’s tactics were not solely aimed at adhering to the law, but rather at utilizing legal frameworks as instruments of pressure. The SEC’s methods included sending subpoenas to international regulators collaborating with Ripple, demanding extensive documentation from business associates, and even filing personal lawsuits against CEO Brad Garlinghouse and co-founder Chris Larsen, charges that have now been dropped.
“While this chapter concludes, the pursuit for coherent, equitable, and transparent cryptocurrency regulations does not end,” Alderoty noted in his correspondence with CNBC. “Ripple remains committed to leading this charge.”
WATCH: Trump addressed the Digital Asset Summit
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