The legal battle between blockchain company Ripple and the US Securities and Exchange Commission continues and neither side is backing down. According to pro-crypto attorney John Deaton, the case is unlikely to be settled as SEC Chairman Gary Gensler has no intention of settling with Ripple.
The crux of the matter is that if a settlement were reached, Gensler would have to publicly admit that XRP transactions, including those in the secondary market, are not securities, which he is not willing to do.
Deaton went on to say that Ripple will only settle with the SEC if the regulator clears XRP and declares the crypto asset unsafe. Members of the XRP community have asked Deaton if a settlement is possible, to which he has replied that neither Ripple nor the SEC will reach a settlement until Judge Analisa Torres rules the case.
To settle charges brought by the SEC, Kraken, a major US cryptocurrency exchange, agreed to pay a $30 million fine and shut down its staking service in February 2023. The SEC remains confident it will succeed in its case against Ripple and has declined to look into its settlement with the blockchain firm.
In December 2020, the SEC filed a lawsuit against Ripple, accusing it of failing to register approximately $1.4 billion in XRP cryptocurrency as securities. Ripple’s money transfer network is powered by XRP. If the SEC wins the case, it could have significant implications for how crypto companies operate in the United States, as federal agency would require most of the products they sell to be subject to strict reporting and registration rules that apply to securities.
The case is significant because it highlights a critical major split between the crypto industry and the SEC. Crypto companies argue that they are creating a transparent, decentralized financial ecosystem by using blockchain technology to store and transfer value, while the SEC believes that most cryptocurrencies should be regulated as securities since they are essentially investment contracts that promise customers a financial return. The Ripple case will set the tone and direction for how the United States will regulate cryptocurrency going forward.
As the SEC has been penalized for not specifying which cryptocurrencies and digital assets it considers securities, the Ripple case is expected to set standards. Instead of engaging in dialogue with industry stakeholders, the agency has been accused of engaging in “regulation by enforcement,” which includes threats of legal action and lawsuits. The Ripple case will almost certainly have far-reaching implications for the US crypto industry, and its outcome will be closely watched by both crypto companies and regulators.
