Last week marked a crucial turning point for the entire crypto world: The SEC acknowledged that XRP is not a security. But is everything as rosy as it appears?
A Quick Look Back at the Beginning
The drawn-out saga of "Ripple vs. SEC" has spanned over two years now. The initial accusations against Ripple Lab, alleging investor deception, were launched back in the spring of 2020. By December 2020, these had morphed into a full-fledged lawsuit, claiming that the founders amassed $1.3 billion in profits from the unregistered sale of securities.
This was followed by a familiar bureaucratic routine: sporadic court hearings, switching judges and lawyers, paperwork pile-ups, and threats tossed from both sides.
One must commend Brad Garlinghouse (CEO of Ripple) - over these years, he not only managed to keep his product viable but also established numerous beneficial partnerships with banking entities and governmental bodies. The founders of Ripple Lab have extended their support beyond the crypto space, channeling their resources towards philanthropic endeavors and even collaborating on ambitious projects like a private space station.
The lawsuit seemingly did not hinder the project's progression, instead, it cast an aura of being the innocent victim of unwarranted sanctions, thereby drawing increased attention from the crypto community to XRP without additional marketing expenditures. Nonetheless, Ripple Lab's outlay for the lawsuit's legal representation was substantial. Brad Garlinghouse claims that the company spent $200 million in defense against the Securities and Exchange Commission lawsuit. He did not disclose whether any payments were made to anonymous insiders who supplied him with insider details about the internal documents of the SEC's former Director of Corporation Finance Division, Hinman. It was this information, after all, that helped Ripple clinch their win.
Ripple Triumphs: What's the Future Holds?
The founders believe that all paths are now open:
- Ripple's Chief Legal Officer, Stu Alderoty, declared immediately after the hearing that Ripple intends to engage in discussions with major US financial institutions in the fall. The purpose of these talks is to explore the potential utilization of Ripple's new rapid money transfer product - ODL.
- Garlinghouse is certain that the court's favorable ruling will enable American banks to use XRP freely for inexpensive international payments.
- The token skyrocketed on exchanges with a staggering 60% price increase.
But What is the Actual Scenario?
According to legal experts and other specialists, it's not as straightforward.
First and foremost, the court's decision specifies that the XRP token is not a security only concerning retail sales on centralized digital exchanges. This means Judge Torres has only reached a partial verdict; the situation regarding institutional investors remains undecided and presents a plethora of questions. This implies that the company should brace itself for more lawsuits and the associated costs.
Secondly, if the decision is indeed partial, then Garlinghouse's optimism could be jumping the gun. Because institutional investors have not been given the green light yet, it's doubtful that large financial companies and banks will consent to collaborate with Ripple Lab and utilize its token for international payments. Such a partnership would imply that the banks themselves would invest their funds in XRP. However, without a definitive verdict, this could be seen as a high-risk move.
Thirdly, the SEC retains the right to appeal. Considering the often slow-moving bureaucratic machine of American regulators, it's reasonable to assume that these proceedings may stretch on for quite a few more years. It doesn't take a crystal ball or AI's help to foresee that Gary Gensler might hold onto past grievances and not allow Ripple Lab to operate unhindered.
As a result, Ripple and other companies facing accusations of offering unregistered securities now have a valuable opportunity that they should seize to their advantage.
