Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Ripple CEO Warns SEC May Sue Over XRP Sale
Fortune | Jeff John Roberts | Dec 21, 2020
Ripple, one of the most important companies in the cryptocurrency industry, said Monday evening that the Securities and Exchange Commission is poised to file a bombshell lawsuit against the company over the alleged sale of unlicensed securities.
The lawsuit will also name Ripple CEO Brad Garlinghouse and cofounder Chris Larsen as defendants, according to Garlinghouse, who told Fortune the agency will file the case in the near future.
Judith Burns, a spokesperson for the SEC, declined Fortune’s request for comment about the lawsuit or to confirm that there would be one.
If the agency does sue Ripple, the action will follow years of debate between the company and the agency about whether XRP, a digital currency associated with Ripple, is a security, like a share of stock—which must be registered with the agency—or is instead a currency and thus beyond the SEC’s purview. XRP is the third most valuable cryptocurrency, and currently has a market cap of $23 billion.
See: SEC sues Kik for US$100M for ‘illegal’ securities offering of digital tokens
A Ripple spokesperson emailed the following statement, attributed to Garlinghouse:
The SEC is fundamentally wrong as a matter of law and fact. XRP is a currency, and does not have to be registered as an investment contract. In fact, the Justice Department and the Treasury's FinCEN already determined that XRP is a virtual currency in 2015 and other G20 regulators have done the same. No other country has classified XRP as a security.
The SEC has permitted XRP to function as a currency for over eight years, and we question the motivation for bringing this action just days before the change in administration. Instead of providing a clear regulatory framework for crypto in the U.S., [SEC Commissioner] Jay Clayton inexplicably decided to sue Ripple – leaving the actual legal work to the next Administration.
This is an attack on the entire crypto industry and American innovation. By giving the stamp of approval only to bitcoin and ether (whose networks are at the mercy of the Chinese Communist Party), the SEC has picked the winners - disregarding an entire industry outside of these two tokens. Ignoring advice from national security experts and the U.S. government, Jay Clayton is handing over the future of our global financial systems - underpinned by blockchain and crypto technologies - to an authoritarian regime.
We are right and will aggressively fight - and win - this battle in the courts to get clear rules of the road for the entire industry in the U.S. We are on the right side of the law, the right side of policy and will absolutely be on the right side of history. In the meantime, it's business as usual for Ripple and our hundreds of customers made up of the world's top financial institutions that have come to depend on Ripple to deliver high-value solutions.
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