Investors are keeping a close eye on the legal battle between the SEC and Ripple Labs, the company behind XRP. Many anticipate that the SEC will withdraw its most recent appeal in the case, signaling a crypto-friendly shift in the regulatory landscape.
The case between the US Securities and Exchange Commission (SEC) and blockchain-based digital payment provider Ripple Labs Inc. has been ongoing since December 2020, when the federal agency filed a lawsuit against the company and two of its executives for alleged violations of securities laws. The case exemplifies the SEC’s widely criticized “regulation by enforcement” approach to the blockchain industry thus far.
A 2023 court ruling brought Ripple a significant partial victory, but the SEC filed to appeal that decision. Recently, though, the agency underwent a leadership change and established a Crypto Task Force following President Trump’s inauguration on January 20, 2025.
Under this new regime, the SEC could withdraw its appeal in the Ripple case, which would likely signal a significant change in the agency’s approach to cryptocurrency.
The industry is watching closely as the SEC holds a series of closed meetings to discuss matters relating to examinations and enforcement proceedings. Plus, at a recent roundtable hosted by Andrew Gordon in Washington, D.C., two key senators reaffirmed their commitment to ending enforcement actions against crypto projects.
SEC vs. Ripple: What Has Happened So Far?
To understand how the case has unfolded, it’s important to look back at its origins.
The SEC’s Lawsuit Against Ripple
- In December 2020, the SEC filed a lawsuit against Ripple, its Executive Chairman Christian Larsen, and CEO Bradley Garlinghouse.
- The agency alleged that Ripple and its executives raised over $1.3 billion through an unregistered, ongoing securities offering involving the sale of XRP.
- According to the SEC, Ripple had been raising funds through XRP sales since 2013 without registering the asset as a security, violating federal securities laws.
- The complaint also accused Larsen and Garlinghouse of personally selling approximately $600 million worth of XRP in unregistered transactions.
- Additionally, the SEC claimed Ripple distributed billions of XRP in exchange for services such as labor and market-making, further violating securities regulations.
- The agency argued that Ripple and its executives failed to provide essential investor disclosures, depriving investors of important information about the company’s financial standing and operations. The lawsuit alleged violations of the Securities Act of 1933, with the SEC seeking injunctive relief, disgorgement of profits with interest, and civil penalties.
- Because Ripple is a well-established company with a widely traded digital asset, this case has the potential to impact the entire crypto industry. Ripple’s decision to challenge the lawsuit rather than settle further heightened its significance.
- The outcome could shape future regulatory decisions and court rulings on how securities laws apply to digital assets. This in turn affects cryptocurrency exchanges, investors, and the industry as a whole in the United States.
More Charges Against Crypto Exchanges
Ripple isn’t the only major crypto company the SEC brought action against in recent years.
- In June 2023, the federal agency also charged Coinbase with operating its cryptocurrency trading platform as an unregistered securities exchange, broker, and clearing agency and for failing to register the offer and sale of its staking service. The SEC brought up the same charge against Kraken in November 2023.
- Like Ripple Labs, Coinbase has also fought back against the SEC, filing its own lawsuit against the federal agency and decrying the SEC’s “regulation by enforcement” approach to cryptocurrency and securities laws.
- The SEC filed 13 charges against popular crypto exchange Binance and its founder, Changpeng Zhao (CZ), in June 2023. The allegations range from secretly allowing high-value US customers to continue trading on the Binance.com trading platform to operating unregistered securities exchanges, clearing agencies, and broker-dealers.
- A year earlier, the SEC also launched an investigation into the company’s native BNB token, probing whether its sale violated securities rules.
- In 2024, the SEC intensified its regulatory crackdown, issuing Wells notices and initiating enforcement actions against cryptocurrency firms like Crypto.com, Consensys, Uniswap, and ShapeShift over the course of 2024. A Wells notice is a formal letter notifying a company of the SEC’s intention to bring enforcement action against it.
Partial Ripple Victory and SEC Appeal
- After more than two and a half years of litigation, Ripple secured a partial victory in July 2023 when Judge Analisa Torres ruled that XRP itself is not a security. However, the ruling distinguished between Ripple’s institutional and programmatic sales.
- The court found that institutional sales—direct sales to institutional investors totaling $728 million—were, in fact, unregistered securities offerings. The reasoning was that institutional buyers had a reasonable expectation of profit based on Ripple’s efforts.
- However, the judge ruled that programmatic sales—i.e., secondary sales on crypto exchanges—did not meet the same criteria.
- While this was a significant win for Ripple, the ruling also confirmed that the company violated securities laws in its institutional sales. The decision clarified that the classification of XRP depends on how it is sold rather than the nature of the digital asset itself.
- In October 2024, the SEC filed a notice of appeal, seeking to overturn Judge Torres’s ruling.
- On January 15, 2025, the SEC filed its opening brief, arguing that the court was wrong in concluding that XRP’s programmatic sales did not constitute an unregistered securities offering.
- The agency also claimed that XRP distributed as employee compensation and through business deals should have been classified as a security.
- In response, Ripple requested an extension until April 16, 2025, to file its response brief, a move considered standard procedure in appellate litigation. While the lawsuit has since been removed from the SEC’s website, the case remains active in the PACER system and is now moving through the Second Circuit Court of Appeals.
A Potential Shift in the SEC’s Stance on Crypto Regulation
Trump’s inauguration on January 20, 2025, has marked a turning point for the SEC’s approach to cryptocurrency regulation, including the Ripple case. Alongside his broader pro-crypto policies, such as the creation of a national Bitcoin stockpile and efforts to strengthen the United State’s position in BTC mining, the president has made major leadership changes at the SEC.
One of his first moves was replacing Gary Gensler, known for his aggressive enforcement actions against crypto firms, with Mark Uyeda as Acting Chairman. Uyeda will serve until Trump’s nominee, Paul Atkins, is confirmed by the Senate.
Atkins, a former SEC Commissioner and the current co-chairman of the cryptocurrency advocacy group Token Alliance, has long pushed for a balanced approach to financial regulation. He has consistently called for clearer guidelines on digital asset classification and has criticized the SEC’s “regulation by enforcement” strategy, arguing that unclear rules stifle innovation in the US.
Under Uyeda, who has also been a vocal critic of the SEC’s past crypto policies—calling them a “disaster for the whole industry“—the agency has already begun making structural changes.
On January 21, the SEC formed a Crypto Task Force led by Commissioner Hester Peirce. The task force’s mandate is to review market structure and develop a comprehensive, transparent regulatory framework for digital assets. Notably, the SEC recently cited this task force to request a delay in an enforcement case.
Commissioners to Decide on the SEC’s Ripple Appeal
Recent SEC actions suggest a potential shift toward a more measured approach to crypto enforcement. On February 10, the agency and Binance filed a joint motion requesting a 60-day pause in their case, citing the formation of the Crypto Task Force. Some industry analysts believe this could signal similar pauses in other cases, including those involving Coinbase, Kraken, and Ripple. On February 14, the SEC requested an additional 28 days to review Coinbase’s appeal.
The SEC has held a series of closed meetings in January in February, which cover the following general agenda:
- Institution and settlement of injunctive actions
- Institution and settlement of administrative proceedings
- Resolution of litigation claims
- Other matters related to examinations and enforcement proceedings
Closed meetings with similar agendas are routine for the SEC, but the industry has been buzzing in anticipation of an announcement regarding the Ripple case.
Roundtable Between Senators and Crypto Investors
Our founder Andrew Gordon recently hosted a roundtable in Washington, D.C. between a select group of digital asset investors and crypto-friendly US senators, including several members of the new Senate Banking Subcommittee on Digital Assets.
The discussion pointed to broad regulatory changes that might lead to the SEC dropping the Ripple case.
Cynthia Lummis (R-Wyoming), chair of the Senate Banking Subcommittee on Digital Assets, and Tim Scott (R-South Carolina), chair of the Senate Committee on Banking, reaffirmed their commitment to ending enforcement actions against crypto projects.
The roundtable also included Senators Marsha Blackburn (R-Tennessee), Bill Hagerty (R-Tennessee), and Bernie Moreno (R-Ohio), and Chris Land, General Counsel for Senator Lummis.
What a Potential Case Drop Means for the Crypto Industry
If the SEC drops its case against Ripple, it would mark a major shift in the agency’s regulatory approach. It would confirm the court’s ruling that XRP’s programmatic sales are not securities, potentially influencing future digital asset classification cases. It could also indicate a move away from enforcement-led regulation and toward clearer rulemaking.
Beyond Ripple, the decision could affect other ongoing lawsuits, including those involving Coinbase and Binance, by limiting the SEC’s ability to categorize tokens as securities without explicit legislative backing. As industry and political support for a more structured regulatory framework grows, a dropped case could accelerate the push for comprehensive digital asset regulations in the US.
Such a move would not only be a win for Ripple, but could also set a new precedent for how crypto is regulated in the country, promoting clarity, fairness, and innovation in the industry.
