- A federal judge found that Ripple violated securities laws in selling the XRP token to institutional investors.
- Ripple must pay a much smaller fine than the SEC wanted.
- XRP’s market value jumped to almost $35 billion after the verdict.
Ripple Labs must pay a $125 million fine, after a federal judge found that 1,278 sales of the XRP token violated securities laws.
However, the penalty was well below the $2 billion the US Securities and Exchange Commission had asked Judge Analisa Torres to dish out.
“This is a victory for Ripple, the industry and the rule of law,” Ripple CEO Brad Garlinghouse tweeted. “The SEC’s headwinds against the whole of the XRP community are gone.”
Traders seem to agree: XRP’s price jumped 19.4% over the past 24 hours to almost $0.62, giving the cryptocurrency a total market value just shy of $35 billion, according to CoinGecko data.
But Torres on Wednesday also banned the company from future securities laws violations, saying that the company had shown it was willing to “cross the line.”
Industry pundits have hailed the fine as a sting for the SEC, which has fired off a constant bombardment of lawsuits towards industry heavyweights like Coinbase and Kraken.
The SEC asked for $2B, and the Court reduced their demand by ~94% recognizing that they had overplayed their hand. We respect the Court’s decision and have clarity to continue growing our company.
— Brad Garlinghouse (@bgarlinghouse) August 7, 2024
This is a victory for Ripple, the industry and the rule of law. The SEC’s…
Long time coming
The fine is the outcome of a long-running case brought against Ripple by the SEC.
The markets watchdog first sued the company and its executives Christopher Larsen and Garlinghouse in 2020, alleging that the company illegally sold its associated token to institutional and retail investors
The lawsuit was seen as a test case for whether regulators and courts would treat cryptocurrencies as subject to securities laws.
In July 2023, Torres handed Ripple a partial victory.
She ruled that the company violated securities laws when it sold its associated token XRP to institutional investors.
However, she also ruled that the sales to retail investors on trading platforms did not violate securities laws.
A ‘victory?’
Ripple hailed the fine as a victory, since it was well below what the SEC had asked Torres to levy.
The SEC had asked Torres to fine Ripple almost $2 billion, saying the unrepentant company had continued to sell XRP to institutional investors even after Torres’s ruling.
Garlinghouse, Ripple’s CEO, said the court reduced the SEC’s demand by around 94%, “recognising that they had overplayed their hand.”
Torres would not make a judgement on whether Ripple had continued to sell XRP to institutional investors.
However, she agreed with the SEC that the company appeared willing to “push the boundaries” of her ban on institutional XRP sales, proving “a likelihood that it will eventually — if it has not already — cross the line.”
She therefore banned Ripple from future such violations.
Joanna Wright is a Regulation Correspondent at DL News. Got a tip? Email at joanna@dlnews.com.