The legal battle between Ripple Labs and the US Securities and Exchanges Commission looks set to rumble on after they issued a joint statement this week.
The letter revealed that they are unlikely to settle the lawsuit any time soon, meaning it is likely to go to a trial. “Counsel for the parties have met and conferred and, having previously discussed settlement, do not believe there is a prospect for settlement at this time,” the statement read. “However, the parties will promptly notify the Court if any settlement in principle is reached.”
The SEC considers Ripple’s XRP token to be a security as opposed to a cryptocurrency, because it is not decentralized. It filed an action against Ripple Labs in December 2020, alleging that the company, executive chairman Christian Larsen and chief executive Brad Garlinghouse raised more $1.3 billion through an unregistered securities offering.
Garlinghouse said Ripple was unable to reach a settlement with the SEC before it filed the lawsuit. The division directors that Ripple was in dialogue with have since left after the Biden administration took power, and new officials are now working on the case.
Gary Gensler, President Biden’s nominee to chair the SEC, has previously claimed that XRP should be deemed a security. The pre-trial conference is scheduled to take place via a video link on February 22 after a failure to reach a settlement.
Stephen Palley, digital currency lawyer at Anderson Kill, believes that there will eventually be a settlement. “Ripple’s going to lose. Garlinghouse and Larsen are going to lose… They lose and they probably settle,” he said in a series of Twitter posts.
Palley believes that XRP will always be reduced to “a centralized thing with little credible utility”, and that the people responsible for creating it “keep getting rich from it”, meaning Ripple Labs has little chance of success in a legal battle.
Binance, Coinbase, Kraken and various other crypto exchanges all halted trading in XRP after the SEC filed the lawsuit. It caused the price to plummet, as XRP went from $0.68 in November 2020 to $0.22 in January 2021.
However, XRP has since rallied amid a wider bull run for the crypto market. It returned to $0.62 on February 13, before a correction sent it back to $0.53. It is now the seventh largest cryptocurrency by market cap, nestled in between Cardano (ADA) and Litecoin.
Most cryptocurrencies are decentralized, but Ripple Labs controls XRP, and the company’s founders have featured in Forbes’ list of the world’s richest people thanks to the size of their holdings.
The SEC complaint seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties. Marc P. Berger, who was deputy director of the SEC’s Enforcement Division, accused Ripple, Larsen and Garlinghouse of failing to satisfy “core investor protection provisions” about its business operations and financial condition over a period of several years.