The legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) continues.
The legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) continues as Better Markets filed an amicus curiae brief supporting the SEC’s appeal against a key 2023 district court ruling. The court had determined that Ripple’s XRP sales to retail investors on exchanges did not violate U.S. securities laws, a decision that Better Markets and the SEC argue misapplied the Howey Test and jeopardized investor protections.
The SEC initially sued Ripple in December 2020, alleging that the company, CEO Brad Garlinghouse, and co-founder Chris Larsen raised $1.3 billion through unregistered XRP sales. While the July 2023 ruling partially favored Ripple, the court later found the company liable for $125 million in institutional XRP sales. The SEC formally appealed the retail sales decision in October 2024, claiming Ripple’s marketing efforts created clear profit expectations among buyers, thus satisfying the Howey Test’s criteria for investment contracts.
Better Markets criticized the district court’s reasoning, emphasizing that XRP transactions on secondary trading platforms should still qualify as securities. The nonprofit argued that the decision created a loophole favoring institutional investors while leaving retail buyers unprotected. It highlighted Ripple’s marketing strategies, including brochures, market reports, and public outreach, which it said were aimed at convincing investors of XRP’s profit potential tied to Ripple’s efforts.
Ripple’s financial position remains strong, with its XRP holdings having increased in value by $125 billion since Donald Trump’s re-election. CEO Garlinghouse recently met with Trump, further fueling speculation about Ripple’s political influence and a potential resolution to the SEC case. The appointment of Mark Uyeda as Acting SEC Chair, viewed as more crypto-friendly than his predecessor Gary Gensler, has also prompted speculation that a settlement might be near.
Better Markets warned of broader implications if the ruling stands, stating it could weaken the SEC’s ability to regulate cryptocurrency markets and protect investors. The organization argued that the decision ignored the realities of modern-day retail investing, where many investors rely on social media and are vulnerable to aggressive marketing tactics.
The case, which has drawn attention across the cryptocurrency and financial sectors, could set a precedent for how digital assets are classified under securities laws. Ripple President Monica Long’s recent comments about the possibility of XRP-based ETFs, combined with Ripple’s growing valuation, have kept XRP in the spotlight, with its price recently reaching $3.15. The outcome of the SEC’s appeal could reshape the regulatory framework for cryptocurrencies and determine the future of Ripple’s operations.
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