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SEC Sues Ripple for Sale of “$1.3 Billion Unregistered Securities” as Crypto Leaders Debate over XRP

The SEC has filed a lawsuit against Ripple Labs Inc. for offering unregistered “digital asset securities” through which $1.3 billion was raised.



The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Ripple Labs Inc., naming co-founder Chris Larsen and CEO Brad Garlinghouse as defendants in the suit, for unregistered “digital asset securities” offering through which $1.3 billion was raised.

SEC sanctions XRP on the grounds it is a security

United States regulators argue that through the sale of XRP tokens, Ripple Labs has raised over $1.3 billion and that it is in violation of existent securities law, as the SEC has decided to rule XRP as a security. Per Stephanie Avakian, the Director of SEC’s enforcement division:

“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business.”

The United States’ sanctions come as an inevitability, as the debate over whether XRP is classified as a security under the US federal securities law has been brewing for years.

Bitcoin and Ethereum, the two leading cryptocurrencies by market capitalization, have been classified as non-securities by US regulators, on the basis that they are decentralized and no company nor individual have control over them. On its end, XRP, the third-largest digital currency in the crypto realm, has failed to be granted a similar status, as it appears that US regulators deem it similar to a Ripple company stock.

XRP, if classified as a security, must be registered with the Securities and Exchange Commission. However, if XRP is classified as a currency, then XRP will fall beyond the scope of the SEC’s jurisdiction.

Why Bitcoin and Ethereum have passed SEC scrutiny

With XRP being one of the largest cryptocurrency by market capitalization, this inevitably stirred quite a reaction from cryptocurrency advocates. Sentiments over whether XRP should be classified as a security appear divided, with Coin Center, a renowned cryptocurrency research institute, calling on Howey’s test to justify the notion that it did not quite view XRP as a security and therefore could not be classified in the same category as Bitcoin and Ethereum.

Howey’s test, which is a test to determine whether an asset should be considered as a security, calls on fundamentals to determine whether an investment constitutes a security– The monetary investment must reap profits that depend on the efforts of a third party. Coin Center’s executive director pinpointed that the think tank had previously mulled over how to define Bitcoin and Ethereum, but that with Ripple there is no question in mind for him.

He referenced two articles through which Coin Center had previously argued that Bitcoin and Ethereum were not securities but pointed to the absence of a similar post for Ripple.

However, in the Ethereum article, it was indicated that previously, Ether might have been classified as a security, relying on Ethereum Foundation but given the fundamentals today, ETH has managed to distinguish itself from such a title. Just like Bitcoin, Ether can be mined and depends on no central entity, but rather the world of thousands of developers, miners, and validators. Per the report:

“As Gary Gensler, former Chairman of the CFTC, said today at the MIT Technology Review Business of Blockchain conference, ether might be classified as a security […] uncertainty abounds because of the flexible nature of the Howey test, which the SEC would employ to classify a token sale as an investment contract and therefore a security.”

The analysis indicates that given the decentralized nature of Ether and how it can run independently of the Foundation’s efforts through the Ethereum network and its validators today, ETH’s decentralization “is hard to differentiate from Bitcoin’s.” However, it is through ETH’s evolution that it has been able to acquire the status of a truly decentralized cryptocurrency, and XRP may have difficulty attaining a similar treatment, as it is not mined.

Is Ripple decentralized?

Ripple has been questioned over how truly decentralized XRP is, since its inception. Although Ripple has attempted to distinguish itself from XRP, the fact that XRP is not mined like Bitcoin and Ethereum, but rather released on a monthly basis from Ripple’s escrow account, has been met with heavy criticism. For Ripple critics, the fact that the major proportion of XRP is still owned by Ripple is enough to raise a few eyebrows.

Despite this, all indications seem to point towards the fact that Ripple has no control over the release of XRP tokens, as it follows a carefully scheduled cryptographic clock. Additionally, the company has asserted that XRP has become increasingly decentralized over the years, acting as a bridge currency between banks to facilitate cross-border payments.

Despite the SEC’s lawsuit, many in the crypto community have also voiced their support of XRP. CEO of SBI Holdings Yoshitaka Kitao, a proud affiliate of Ripple, expressed his support:

“Japan’s FSA has already made it clear that XRP is not a security. I’m optimistic that Ripple will prevail in the final ruling in the US. SBI Holdings remains a steadfast partner to Ripple, and looks forward to expanding together in Asia.”

Ripple counters SEC arguments

To dispel the amount of FUD (fear, uncertainty, and doubt) at the moment, CEO of Ripple Brad Garlinghouse also reiterated that his company has time and again worked hard at being transparent, explaining why XRP should not be deemed a security. He said that XRP was not an investment contract, as XRP holders do not gain a share of Ripple company, or have any corporate rights whatsoever. Garlinghouse said:

“Purchasers receive nothing from their purchase of XRP except the asset. In fact, the vast majority of Ripple holders have no connection or relationship with Ripple whatsoever.”

He added that an investment in XRP did not equate to a share of Ripple’s company, therefore dispelling the notion that XRP was a security. Garlinghouse wrote:

“Ripple (our company) has shareholders; if you want to invest in Ripple, you do not buy XRP but rather shares in Ripple.”

Garlinghouse also added that the US Treasury Department has long deemed XRP as a currency. According to him, this argument in itself is self-explanatory and indication enough that Ripple has overextended itself to confirm to financial rules and follow AML compliance laws. For him “it is truly confounding that the SEC would take this step” as XRP, if deemed a currency, would not fall under the same regulations as securities. He said:

“Unlike securities, the market value of XRP has not been correlated with Ripple’s activities. Instead, the price of XRP is correlated to the movement of other virtual currencies.”

XRP’s price tanks

Since Garlinghouse’s open announcement yesterday that the SEC was going to move forward with its lawsuit against Ripple, XRP has since plummeted in price. Should Ripple be fined and ruled as security, this may cause it to be delisted from certain cryptocurrency exchanges, and inhibit its adoption. Additionally, it may significantly impact the crypto industry, with XRP being the third-largest cryptocurrency by market cap at the time of writing.

With the news exploding all over social platforms, XRP’s price has suffered tremendously, dropping to lows of $0.35 on CoinMarketCap. It has ceded its spot of third-largest cryptocurrency on the market to Tether (USDT), as investors have dumped their XRP, triggering a 13% decrease for the altcoin since yesterday’s close.

Image source: Shutterstock



Blockchain news

Crypto Market Roundup: Top Earners and Losers for Today

Cardano and The Graph are the top gainers today, while the performance of Shiba Inu and IoTex hit the worst to become the biggest losers today.



The selling pressure in the global crypto market was stumped on Friday as several coins began paring off their losses from the previous day.

Bitcoin’s market strides were visible as the largest cryptocurrency surged 1.72% to $46,146.24 at the time of writing. Ethereum (ETH) is also favoured by the bulls, inching a 3.04% gain to $3,237.66, according to CoinMarketCap.

Amidst the broader rise in price, here are the top gainers and losers for today, August 13.

Top Gainers

The Graph (GRT) is leading the altcoin surge today after the coin’s buyers pushed the price to $0.9413, atop an 18.30% gain. At this pace, The Graph is on track to break the $1 resistance level and journey down toward its 90-day high of $1.42. The Graph’s use case permits an increased embrace. It plays a role as an indexing protocol for querying data for networks like Ethereum and IPFS, supporting many applications in DeFi and the broader Web3 ecosystem.

Meanwhile, Cardano (ADA) has also shifted its price to its highest price gains of all time, surging above the $2 psychological level for the first time in 3 months. With several test nets deployed, the coin has enjoyed increased sentiment from buyers as the broader digital currency ecosystem prepares for the arrival of the Alonzo upgrade that will aid the emergence of smart contracts and DApps on the Cardano blockchain. The token has been tagged as undervalued. However, we may begin to see the coin’s true worth come to life with the new upgrade.

Top Losers

The majority of the tokens are paring off their losses. However, meme token Shiba Inu (SHIB) is the biggest loser amongst the altcoins topping the chart after inking a 0.50% slip in price to $0.00000795. IoTex (IOTX) was down 3.36% to $0.1102 during the intraday.

The momentum in the market may drive in such buying volatility that will stir these coins off the red zones. The global crypto market is currently on track to re-register a $2 trillion market cap to cover the weekend.

Image source: Shutterstock

The Graph (GRT) is leading the altcoin surge today after the coin’s buyers pushed the price to $0.9413, atop an 18.30% gain. At this pace, The Graph is on track to break the $1 resistance level and journey down toward its 90-day high of $1.42. The Graph’s use case permits an increased embrace. It plays a role as an indexing protocol for querying data for networks like Ethereum and IPFS, supporting many applications in DeFi and the broader Web3 ecosystem.



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Blockchain news

Ethereum is Expected to Undergo a 90% Daily Emission Reduction Following ETH 2.0 Upgrade

Market analyst Lark Davis believes that Ethereum 2.0 upgrade will prompt a 90% daily emission reduction from 12,800 to 1,280.



Ethereum (ETH) was up by 9.72% in the past week to breach the psychological price of $2K during intraday trading. ETH’s price stood at $2,056 as the second-largest cryptocurrency continues to gain momentum.

Market analyst Lark Davis believes that the upgrade of Ethereum 2.0 will prompt a 90% daily emission reduction from 12,800 to 1,280. He explained:

“The other wildly important aspect of The Merger is that ETH will undergo a 90% reduction in daily emission. Basically from 12,800 a day to 1,280 a day. Yearly inflation from 4.3% down to 0.43%. This is equivalent to 3 Bitcoin halvings, and is only months away.”

Ethereum 2.0, also known as the Beacon Chain, was launched in December 2020 and was regarded as a game-changer that seeks to transit the current proof-of-work (POW) consensus mechanism to a proof-of-stake (POS) framework.

Davis also noted that Ethereum would experience “Triple Halving” as part of the ETH 2.0 upgrade, a highly significant economic event for the asset’s price in the coming years.

Ethereum whales cumulatively hold 60.52 million ETH

According to on-chain metrics provider Santiment:

“Ethereum whales that hold between 10k and 1 million ETH in their respective wallets now own a cumulative total of 60.52m coins. This is the highest amount held by this tier since in 5 weeks, and represents a 1.65million ETH accumulation in the past 6 days.”


Therefore, ETH whales continue investing in this asset, which indicates high confidence levels.

Ethereum has been making headlines based on its notable strides. For instance, ETH has had an impressive return on investment (ROI) of 171% this year compared to tech stocks like Microsoft, Facebook, and Apple. Furthermore, Davis had previously noted that Ethereum was settling three times more value on-chain than Bitcoin daily.

Image source: Shutterstock

“The other wildly important aspect of The Merger is that ETH will undergo a 90% reduction in daily emission. Basically from 12,800 a day to 1,280 a day. Yearly inflation from 4.3% down to 0.43%. This is equivalent to 3 Bitcoin halvings, and is only months away.”



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Blockchain news

South Korea Authorities Seizes $47M in Crypto from Tax Evaders

South Korean authorities have made the largest crypto seizures in the country’s history. $47 million in digital currencies have been confiscated.



Authorities in the South Korean province of Gyeonggi have conducted the largest tax seizures ever, seizing $47 million in Bitcoin (BTC) and Ethereum (ETH).

According to the coverage reported by the Financial Times, the seizure involved about 12,000 tax evaders. The authority has called the action the largest “cryptocurrency seizure for back taxes in Korean history.”

Those “tax dodgers” committed the crime by connecting their trading or investment activities on trading platforms operating in the country with their phone numbers. The process, though rigorous, had to be done manually as crypto exchanges were unable to fully provide the Know-Your-Customer (KYC) details of the defaulting taxpayers. In addition, the FT report was unclear which digital currency trading platform was involved in the investigation.

South Korea has a robust cryptocurrency trading engagement amongst its citizens, and the country has been making moves to implement accomodating regulations. One of these is the law passed by the Korean National Assembly in March 2020. This law mandates cryptocurrency exchanges to take down customer’s details through KYC and obtain licenses to operate from banks.

While big exchanges such as UpBit have been able to comply, other smaller trading platforms have had their struggles in complying, a situation that was compounded by financial institutions dissociating from crypto exchanges. Besides these, South Korea has long been mulling enforcing a 20% capital gains tax on cryptocurrencies, all of which will be made easier with compliant crypto exchanges.

South Korea is one of the more receptive countries to blockchain and cryptocurrency-related innovations. While crypto has thrived in the country in the past decade, the government is taking bold steps to develop its own Central Bank Digital Currency, the Digital Won. Despite its soft stance, however, the nation has zero-tolerance for fraud amongst crypto entities, as showcased in the ongoing raid of Bithumb exchange amidst a broad fraud investigation.

Image source: Shutterstock



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