Regulatory Pressure Mounts! SEC Sues Ripple for Alleged Illegal Sale of Securities, XRP Plummets Nearly 10% in Early Trading

Ripple CEO Brad Garlinghouse confirmed that the U.S. Securities and Exchange Commission (SEC) intends to file a lawsuit against Ripple for selling XRP.

Ripple Accused of Illegal Securities Sales

According to a report by Fortune magazine, the U.S. Securities and Exchange Commission (SEC) has accused Ripple of violating the Investor Protection Act when selling XRP tokens. Ripple CEO Brad Garlinghouse and co-founder Chris Larsen are named as defendants, and the SEC plans to file a lawsuit against the company shortly. While Ripple CEO Brad Garlinghouse confirmed the news, the SEC has not responded to the accusations.

The focus of the lawsuit will be on whether the digital currency XRP issued by Ripple falls under the category of securities like stocks. If so, the SEC would have regulatory authority, and the charge of illegal securities sales (XRP) against Ripple would stand. However, if XRP is ultimately deemed a currency or commodity, the SEC's accusations against Ripple would not hold, and the SEC would not have regulatory authority over XRP.

The CEO of Ripple expressed strong dissatisfaction with the lawsuit, stating that unlike Bitcoin and Ethereum, XRP is not a security and is a product made by a U.S. company. He found the SEC's decision to sue confusing and believes it is a significant blow to the entire cryptocurrency industry and U.S. innovation. Ripple will vigorously defend against the case.

Additionally, Brad Garlinghouse pointed fingers at SEC Chairman Jay Clayton, criticizing him for filing the lawsuit against Ripple just before stepping down and leaving the mess for the next chairman.

Ripple Responds via Email: Unjustified Accusations

According to a Ripple spokesperson, legally and factually, the SEC is entirely wrong. XRP is a currency and does not need to be registered as an investment contract. FinCEN, the Financial Crimes Enforcement Network, recognized XRP as a virtual currency back in 2015, as did other G20 regulatory bodies. No other country has classified XRP as a security. Ripple further stated that the SEC Chairman Jay Clayton's inexplicable decision to sue Ripple just before stepping down fails to provide a clear regulatory framework for U.S. cryptocurrencies and leaves a mess for the next administration.

Ripple's documents also argue that for public policy reasons, XRP should not be considered a security and that XRP is better than Bitcoin and Ethereum blockchains, which are controlled by China.

Vitalik directly called out Ripple for getting increasingly absurd in trying to clear the accusations. He tagged Chinese Foreign Ministry spokesperson Hua Chunying and wrote in Chinese: "Why haven't you given us orders yet? Should we use our main node to fork and print some Ethereum for you?"

Ripple Had Foreseen this

In October this year, Ripple co-founder Chris Larsen revealed at the Los Angeles Blockchain Summit on October 6th that the U.S. is seriously lagging in preparing for the next generation of the global financial system based on cryptocurrencies. Coupled with the U.S. authorities' "forceful regulatory" policy stance, Ripple may relocate its headquarters overseas to seek a more favorable development environment. Chris Larsen stated:

"Blockchain and digital currencies are not welcome in the U.S. If you want to engage in related businesses, you should consider going to other countries. Frankly, we are considering relocating our headquarters to a more friendly jurisdiction."

Looking back, it is inevitable to suspect that perhaps Ripple had known about the SEC's move back in October. Following the news this morning, the XRP token price plummeted rapidly, with a 12% decrease in the token's value within 24 hours at the time of writing this article.