XRP Price Falls Amid Looming SEC Case
The U.S. Securities and Exchange Commission (SEC) plans to file a suit against Ripple over the sale of XRP, according to Ripple’s Chief Executive Officer Brad Garlinghouse.
However, there is no specific date for the lawsuit yet, but when it is filed in the future, Brad Garlinghouse and Ripple will be defendants.
According to Fortune, the lawsuit will be filed soon, though no specific date has been provided yet. The suit had not been filed as of press time. Ripple co-founder Chris Larsen and Garlinghouse will be named defendants alongside the firm, Garlinghouse said.
This is an unusual situation… it doesn’t usually happen that the company being sued by the SEC announces the lawsuit. It’s like they know it’s coming… which may explain why major XRP holders moved large quantities of the digital asset while it was at a recent high in the price.
Garlinghouse has commented on the looming lawsuit, saying it’s an attack on the cryptocurrency industry.
“It’s an attack on the entire crypto industry and American innovation,” he said in a statement.
Ripple said the firm is prepared to defend itself against the lawsuit whenever the SEC is ready. With the news about the lawsuit, the XRP price has been on a continual decline.
Ripple – Security or Not?
The SEC had already taken a stance on Bitcoin and Ethereum, saying neither of them is securities. The ruling gave users and exchanges the freedom to operate and transact with them.
However, there have been heated augments about Ripple and if it will be classified like Bitcoin and Ethereum. The SEC has not accepted XRP as a security, which has stunted the growth of both XRP and its company Ripple. Some experts in the industry believe that XRP should be called security because it has the features to be called one according to the standard used by the SEC; the Howey Test.
Many in the cryptocurrency space feel as though the Howey Test is a bit archaic for the times and the technology at hand when it comes to securities regulations. This became the standard used to decide what was to be considered a security back in 1946 after a lawsuit.
The lawsuit took place after the Securities Act of 1933 and the Securities Exchange Act of 1934 came into affect. So, it is easy to see why the intepritation of these standards to cryptocurrencies can be considered inappropriate at best.
However, many others don’t feel the same way. And the inability of the SEC to have a clear stance has prolonged the debate for far too long. But this time it seems, at least according to the company, that the watchdog is set to address the issue, after sending Ripple a message it’s planning to file a suit against the firm.
Ripple Could Lose Heavily
If XRP is finally classified as a security, it means Ripple is liable to pay a huge fine, just like the case with KIN.
The fine will not be the only loss for Ripple, as exchanges have already begun delisting the digital asset from their platforms. This may continue to have a massive influence on the future price of XRP.
The relationship between Ripple and XRP is very different from the foundations of Ethereum and Bitcoin. XRP developers founded Ripple and assigned a large number of tokens (80%) to Ripple, the company they own and manage. As a result, many have seen Ripple more like a stock or other security, since the firm has major control over the token.
Investor Protection Violations
Ripple said it plans to defend itself against the lawsuit which will be filed by the SEC. Although, Ripple has already threatened to leave U.S. jurisdiction if the regulatory climate does not change.
When the suit is eventually filed, it will be one of the highest-profile lawsuits by SEC against a major player in the cryptocurrency market.