The Ripple Effect: A Deep Dive into the Ripple-SEC Legal Battle and Its Implications

MV Global
12 min readJul 20, 2023



Ripple, a San Francisco-based blockchain technology company, has made a name for itself in the world of digital currencies through its digital payment protocol and its associated digital token, XRP. XRP functions within Ripple’s technology to enable quick, low-cost international money transfers. Despite facing challenges over its status, XRP has consistently remained one of the top cryptocurrencies by market capitalization.

In December 2020, Ripple found itself in the crosshairs of the U.S. Securities and Exchange Commission (SEC). The SEC filed a lawsuit against Ripple, alleging that it had conducted an unregistered securities offering through its sales of XRP. This marked the beginning of a high-stakes legal battle that has drawn global attention due to its potential implications for the broader crypto industry. The central question at the heart of this dispute is whether XRP should be classified as a security or a commodity.

This article offers a comprehensive exploration of the ongoing legal saga between Ripple and the SEC. It provides a deep dive into the initial charges, the landmark ruling delivered in July 2023, and the immediate aftermath and responses from Ripple, the crypto markets, and the XRP community. Furthermore, it presents insights from legal experts, details on the pre-trial referral, and an analysis of the case’s overall impact on Ripple, XRP, and the larger crypto landscape. This article aims to provide an in-depth understanding of this critical case and its potential long-term consequences for the world of digital currencies.

History of the Case


In December 2020, the United States Securities and Exchange Commission (SEC) took a step that would significantly impact the world of cryptocurrencies. It filed a lawsuit against Ripple Labs Inc., the company behind the digital token XRP, and two of its executives — CEO Brad Garlinghouse and Chairman Chris Larsen. The allegations were severe: the SEC charged Ripple and its executives with conducting an unregistered securities offering worth over $1.3 billion through the sale of XRP.

According to the SEC’s complaint, Ripple “raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide.” The SEC also alleged that Ripple distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services. The executives Garlinghouse and Larsen were also accused of personally selling about $600 million in XRP.

At the heart of the lawsuit was the question of what XRP, the third-largest cryptocurrency by market capitalization at that time, actually represented. The SEC asserted that XRP was a security and, therefore, subject to regulations designed to protect investors and ensure the integrity of the securities markets. The SEC argued that XRP was not a currency but an investment contract — a security — because investors in XRP anticipated profits predominantly from the efforts of Ripple and its executives.

In contrast, Ripple strongly disagreed with the SEC’s characterization of XRP as a security. Ripple asserted that XRP is a virtual currency and thus, falls outside the SEC’s jurisdiction. They argued that the SEC’s theory, that XRP is an investment contract, is wrong on the facts, the law, and the equities.

Ripple responded to the charges robustly, defending the status of XRP as a cryptocurrency rather than a security. The firm highlighted the open-source nature of the XRP ledger and the digital currency’s independence from Ripple. They asserted that XRP was a fully functional currency that offers a better alternative for real-world use cases, suggesting that it should not be classified in the same category as securities.

Ripple also took aim at the SEC for its perceived lack of clarity in regulating the cryptocurrency industry, suggesting that the lawsuit against Ripple was an attack on the entire industry. CEO Brad Garlinghouse went on record saying that the SEC’s lawsuit was “fundamentally wrong as a matter of law and fact,” and vowed to fight the charges.

In the following months, Ripple would engage in a series of legal battles to clear its name and the status of XRP. Little did anyone know at the time, but these proceedings would lead to a landmark ruling in July 2023 that would significantly influence the future of Ripple, XRP, and potentially the broader crypto market.

The Landmark Ruling


In July 2023, the district court delivered a landmark ruling in the case between Ripple Labs and the U.S. Securities and Exchange Commission (SEC). In the words of Ripple’s Chief Legal Officer, Stuart Alderoty, the ruling was “a huge win”. Alderoty further emphasized that “as a matter of law — XRP is not a security”.

The court’s ruling was multifaceted and nuanced, impacting various aspects of Ripple’s operations and the status of XRP. First, the court declared that XRP, the token itself, is not an investment contract and thus not a security in and of itself. This was a significant point in favor of Ripple, as it effectively decouples the status of XRP from the company’s business practices.

Second, the court ruled that Ripple’s programmatic sales of XRP on crypto exchanges did not violate securities laws. These sales were made in such a way that the buyer did not know who they were buying from and thus could not have known they were investing in a common enterprise. This distinction was critical, as it sets a precedent for other crypto firms that conduct sales in a similar manner.

However, the court also found that Ripple’s institutional sales of XRP did violate securities laws. These sales were made directly to institutions where the buyer knew they were investing in Ripple, and thus they were classified as securities transactions.

The financial implications of the court’s ruling are significant. Between 2013 and 2020, the lawsuit claims that Ripple made $757.6 million from programmatic sales and $728.9 million from institutional sales. While Ripple had halted programmatic sales in 2019, it continued to make institutional sales of XRP, which the court now deemed as having violated securities laws.

In addition, since 2021, Ripple has sold an additional $14 billion worth of XRP. Although Ripple has stated that most sales have been outside the US, and thus outside the scope of the SEC case, the sales within the US are now classified as unregistered securities sales. The potential ramifications for these sales, from 2021 through the present day, are yet to be fully realized.

This ruling holds broader implications for the cryptocurrency industry, potentially impacting how other cryptocurrencies are classified and regulated. It also has significance for crypto exchanges, such as Coinbase and Binance, who may face similar legal battles against the SEC in the future.

Ripple’s Response and Market Reaction


Despite the mixed nature of the ruling, Ripple Labs was quick to celebrate its partial victory. The company, particularly its Chief Legal Officer, Stuart Alderoty, emphasized the significance of the court’s decision that “as a matter of law — XRP is not a security,” and that its programmatic sales on exchanges were not a security offering. This celebration wasn’t merely about Ripple’s triumph, but it also served to highlight the broader implications for other crypto firms.

Ripple’s reaction underlines the impact this landmark ruling could have on the broader cryptocurrency industry. It sets a precedent that could potentially influence future legal battles involving other cryptocurrencies, notably those involving large exchanges like Coinbase and Binance that are currently under the SEC’s radar.

The market’s response to the ruling was immediate and decisive. Following the announcement of the court’s decision, the price of XRP, Ripple’s associated cryptocurrency, jumped significantly. According to Messari, the price of XRP surged by an impressive 70% to $0.80, reflecting the investors’ optimism and confidence in the future of the token post-ruling.

The ruling’s impact wasn’t confined to XRP alone. The shares of Coinbase, a major cryptocurrency exchange, saw a remarkable increase. As per Messari’s report, the share price of Coinbase rose by 24% on the day of the ruling, closing at $107.

Additionally, other tokens that are currently the subject of SEC cases (related to Coinbase and Binance) also saw favorable price action following the ruling. The market’s response underscores the far-reaching implications of the court’s decision on Ripple, extending beyond the company and its native token to other cryptocurrencies and the industry at large.

The Ripple Community and Legal Perspectives


The Ripple community, consisting of XRP holders, supporters, and enthusiasts, exhibited immense optimism following the judgment. They embraced the court’s ruling as a victory, irrespective of the lingering uncertainties and the possibility of future legal contests. One community member made a statement, embodying the overall sentiment, declaring, “We’re bullish regardless of what happens at this trial (which has virtually nothing to do with XRP). XRP holders already won. It’s been decided. Period. The current law in the United States = XRP is not in and of itself EVER a security.”

While Ripple and its community celebrated, some legal experts expressed reservations about the ruling. John E. Deaton, a pro-Ripple attorney, and Bryan Jacoutot, a general litigation attorney, both voiced their concerns about the stability of the judgment.

Deaton warned that the ruling may not be as solid as it appears, stating, “The Ripple decision resides on shaky ground, is likely (and ripe) for appeal, will likely result in reversal, and is not necessarily a cause for celebration.”

Similarly, Jacoutot expressed his doubts about the ruling, opining, “I’ve reviewed the district court ruling on XRP and it rests on very shaky ground. Expect an appeal.” He further stated that he believes the judge “got the law wrong,” indicating a potential for the ruling to be overturned on appeal.

Adding another layer of complexity to the situation, District Judge Analisa Torres referred the Ripple case to Magistrate Judge Sarah Netburn for general pre-trial. This referral has significant implications as it means both Ripple and the SEC will engage in discussions to determine the issues, laws, or facts that matter before the court trial. This could open new dimensions to the case, potentially influencing the final outcome. The selection of Judge Netburn, known for ruling against the SEC in the past, has further fueled optimism within the Ripple community.

The Future of Ripple and XRP


In the wake of the groundbreaking ruling, Ripple’s leadership has expressed confidence in the future of their On-Demand Liquidity (ODL) product. Ripple’s General Counsel, Stu Alderoty, indicated in an interview with CNBC that they anticipate a surge in interest from U.S. banks and financial institutions for using XRP in cross-border transactions.

Ripple’s ODL is a revolutionary product that leverages the XRP token to enable real-time, cross-border transactions. Traditionally, these transactions have been slow and expensive due to the need for pre-funded accounts in the receiving currency. By using XRP as a bridge currency, Ripple’s ODL enables instantaneous transfers between different fiat currencies, potentially saving banks and their customers significant time and money.

Despite the groundbreaking nature of this technology, its adoption has been hampered by the legal uncertainties surrounding the status of XRP. However, with the recent ruling that XRP is not a security, at least in some sales, Ripple expects renewed interest from American financial institutions. Alderoty shared his optimism, stating, “I think the answer to that is yes,” when asked whether American banks would return to use Ripple’s ODL.

Beyond its immediate implications for Ripple and XRP, the ruling could potentially influence the broader cryptocurrency market. As Ripple has demonstrated, it is possible for a crypto firm to argue in court that its token is not inherently a security and win. This could provide a roadmap for other crypto firms, like Coinbase and Binance, who are currently facing similar scrutiny from the SEC. However, the exact implications will depend on the specifics of each case and the nature of the token involved.

However, the future of Ripple and XRP is not entirely certain. Legal experts, including Deaton and Jacoutot, have warned that the SEC may decide to appeal the decision. If the SEC chooses to appeal, the case would move to the second circuit. Here, there’s a chance that the positive rulings could be overturned. This potential for an appeal introduces a degree of uncertainty to Ripple’s future and the status of XRP. The outcome of such an appeal could either reinforce the current verdict or reverse the gains Ripple has made, significantly impacting the future of Ripple and the status of XRP.



The dispute between Ripple and the SEC has been a significant event in the crypto landscape. In December 2020, the SEC charged Ripple with conducting an unregistered security offering for the XRP token. Ripple countered these allegations, insisting that XRP is more akin to a commodity than a security. After an extensive legal battle, a watershed ruling arrived in July 2023, concluding that while the XRP token itself is not a security, institutional sales made directly by Ripple violated securities laws.

Following the ruling, Ripple celebrated its partial victory, which also sparked optimism among the XRP community and prompted a positive response from the crypto markets. However, various legal experts have expressed reservations about the ruling, warning that it rests on “shaky ground” and could potentially be overturned on appeal.

The case between Ripple and the SEC has far-reaching implications for Ripple, XRP, and the wider crypto landscape. For Ripple, the judgment represents a significant legal victory, albeit a partial one, as it faces potential ramifications for its future institutional sales. Meanwhile, XRP experienced a surge in price following the ruling, reflecting the market’s positive response.

Beyond Ripple and XRP, the case sets a precedent for other crypto companies facing similar allegations from the SEC. The judgment that XRP is not in itself a security and that programmatic sales on exchanges are not a security offering could influence the outcomes of upcoming legal battles involving other crypto firms.

However, the road ahead remains uncertain, with the possibility of an appeal and potential overturn of the ruling. This ongoing legal saga continues to keep the crypto world on its toes, underscoring the need for clear and comprehensive regulations in the rapidly evolving digital asset space.

The latent bullishness in the crypto market is another crucial point worth noting. Despite the legal uncertainties surrounding Ripple, the market responded positively to the ruling, indicating a robust optimism and belief in the potential of cryptocurrencies. This latent bullishness suggests that any goodwill or positive ruling can trigger significant bullish momentum, emphasizing the crypto market’s sensitivity to regulatory news and its hunger for positive developments. As the Ripple case unfolds further, it will undoubtedly continue to be a key point of interest for investors, legal experts, and crypto enthusiasts alike.

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About Master Ventures

Master Ventures is a blockchain-focused venture studio helping to build the next generation of blockchain-based Web 3.0 system innovations within the crypto industry. Launched in 2018 by Founder and CEO Kyle Chassé, the company’s ethos can best be summarized in the acronym #BeBOLD: Benevolent, Open, Love, Decentralized.

Master Ventures co-creates with entrepreneurs and businesses worldwide to turn the best ideas into innovative and disruptive products. They do this by investing as strategic partners through offering advisory services to the projects they believe in. To date, Master Ventures has invested in over 40 crypto projects, including the likes of Kraken, Coinbase, Bitfinex, Reef, DAO Maker, Mantra DAO, Thorchain, and Elrond.

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