Introduction
Ripple was founded in 2012 by Chris Larsen and Jed McCaleb to provide fast, reliable and inexpensive cross-border money transfers for banks and financial institutions worldwide. Ripple Net, a decentralized digital payment protocol developed by Ripple, was developed to make financial transactions more efficient in various parts of the world, rivalling traditional payment systems such as SWIFT by making international payments low-cost and instantaneous through the use of XRP, the native network token.
Ripple had made great progress with its network developed in the field of financial services and made various strategic partnerships. Expanding the RippleNet network by establishing partnerships with leading companies such as Santander, Standard Chartered, American Express, Ripple paved the way for the use of XRP, the local token of its network, as an intermediary currency in international transfers with the On-Demand Liquidity service. With the developments and partnerships made by Ripple, Ripple Net has become a global payment network by connecting more than 300 financial institutions.
While everything was going well for Ripple, on December 22, 2020, the US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs Inc. The SEC alleged that Ripple violated federal securities laws by selling the XRP token as an unregistered security.
In this article, we will share with you what happened in the ongoing litigation process between Ripple and the SEC before the 2024 US Presidential elections, post-election developments and expectations.
Ahead of the 2024 US Presidential Elections, Litigation and Its Impact
Founded in 2012, Ripple was continuing to grow its network with developments and strategic partnerships in the field of financial services. As the cryptocurrency market entered a general bull run in 2017-2018, XRP, the native coin of the Ripple network, gained great bullish momentum, reaching an all-time high price of $3.84 in January 2018, according to CoinMarketCap data. The bull market in 2018 gave way to a severe correction and bear market. In March 2018, the price fell as low as $0.50. Throughout 2019, the XRP price fluctuated between $0.20 and $0.50. In March 2020, it fell to around $0.15 during the market crash caused by the COVID-19 pandemic. XRP experienced some recovery towards the end of 2020 with new partnerships and increases in the use of On-Demand Liquidity (ODL). In November 2020, the price climbed to around $0.70.
On December 22, 2020, the US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs and its executives (Brad Garlinghouse and Chris Larsen). The SEC alleged that Ripple sold over $1.3 billion worth of unregistered securities, that Ripple executives such as Chris Larsen and Brad Garlinghouse made personal gains from these sales, and that Ripple violated federal securities laws by selling the XRP token as an unregistered security. In this context, the SEC demanded the return of $1.3 billion in funds Ripple collected due to corporate XRP sales, as well as additional criminal sanctions. It also requested a permanent ban on Ripple’s XRP sales.
Ripple in defense of the lawsuit filed by the SEC.
- That XRP is a “digital asset”, not a security,
- That the SEC does not provide clear legal guidelines for the cryptocurrency market and that there is a lack of regulation,
- That the SEC failed to fairly inform Ripple and market participants by not providing clear guidance on XRP’s regulatory status for 8 years,
- The SEC’s failure to treat Bitcoin and Ethereum as securities suggests that XRP should be treated the same way,
- That XRP is recognized as a digital asset by many countries around the world,
- He noted that XRP’s sales are just like trading Bitcoin or other cryptocurrencies.
In its defense, Ripple criticized the SEC’s approach from a legal, logical and cryptocurrency market perspective. It made a strong defense against the case, arguing that XRP’s legal status would set a precedent not only for Ripple but for the entire crypto sector. Ripple’s defense raised the lack of regulation for the cryptocurrency market.
Ahead of the 2024 US Presidential elections, important court rulings in the ongoing case between Ripple and the SEC:
- In March 2021, it granted Ripple’s request for access to the SEC’s internal documents.
- In July 2022, the SEC ordered Ripple to turn over internal documents related to a 2018 speech by William Hinman, the SEC’s former Chief Corporate Finance Officer, in which he stated that Ethereum is not a security.
- In December 2022, both Ripple and the SEC applied for the case to be settled through summary judgment, but the court ordered a full trial.
- In July 2023, it ruled that individual sales of XRP were not securities, but institutional sales could be securities. This decision was seen as a partial victory for Ripple and the price of XRP surged significantly. The SEC appealed the court’s decision and demanded that Ripple’s penalty be increased.
- In August 2024, it ruled that some aspects of Ripple’s sales of XRP violated securities laws and imposed a $125 million fine. The SEC appealed the court’s decision. The SEC argued that securities law was violated and asked the appellate court to reconsider the decision.
With the SEC’s appeal of the court decision, the case will continue in 2025. The jury trial is expected to take place on January 21, 2025.
2024 Developments and Prospects After the US Presidential Election
Ahead of the 2024 US Presidential election, the Trump administration stated that it would adopt a friendlier policy towards cryptocurrencies and after Trump promised to reduce regulatory uncertainty by emphasizing that the SEC should relax its aggressive stance, Donald Trump’s election victory saw a rise in the cryptocurrency market and XRP. After the presidential election, there was an expectation that regulatory pressure would decrease in the markets. SEC Chairman Gary Gensler announced that he will leave his post on January 20, 2025. After this news, the possibility of the SEC settling the Ripple case has strengthened. This increased investors’ interest in XRP. After these developments, XRP reached the level of $2.5 in November with 350% increase in value. With its rise in the crypto market, XRP ranked among the top 3 coins by market volume.
Conclusion
With Donald Trump winning the 2024 US Presidential election, there was a rapid rise in the XRP price. The reason for this rise;
- Expectations that the Trump administration will ease pressure on the SEC,
- Increasing opinions that the ongoing lawsuit between Ripple and the SEC will result in favor of Ripple,
- Trump’s statements on cryptocurrencies,
- SEC Chairman Gary Gensler announced that he will step down on January 20, 2025,
- Growth of Ripple’s operations in Asia and the Middle East, increasing demand for XRP
Most of the opinions on the future of the case converge on a settlement. With the Trump administration’s friendlier approach, the possibility of a compromise between Ripple and the SEC is strengthening. In this process, Ripple may end the case by paying a certain amount of penalty to the SEC and the legal status of XRP may be clarified.
A new rally in XRP price can be expected if Ripple wins or settles the SEC case outright. Ripple may accelerate its activities in the US market and increase the adoption of XRP. The use of the Ripple network may increase and this may support the rise of the XRP price.
