Blockchain firm Ripple Labs has faced significant criticism over the handling of its in-house token, XRP, in the past. Now, the Securities and Exchange Commission (SEC) is set to rope it into a lawsuit. While Ripple seems posed to fight the agency’s attacks, some in the crypto industry are also lending their opinions to the matter.
The Commission is Coming
Earlier this week, Fortune Magazine reported that the SEC was finalizing a lawsuit against Ripple Labs concerning the XRP token and its status as a security. The news source cited sources at the firm, including chief executive Brad Garlinghouse. The report noted that Garlinghouse and Ripple Labs co-founder Chris Larsen would be named in the suit. While the SEC has yet to confirm any reports, Garlinghouse told the news source that a case should arrive shortly.
Garlinghouse went even further, sharing the report on his Twitter page with accusations against the SEC. As he explained, agency Chairman Jay Clayton – who is set to step down from his role this month – is picking, trying to score a big win in his final act. Whether he stifles innovation in the crypto industry doesn’t matter so much to him.
“The SEC – out of step with other G20 countries & the rest of the US govt – should not be able to cherry-pick what innovation looks like (especially when their decision directly benefits China). Make no mistake, we are ready to fight and win – this battle is just beginning,” Garlinghouse remarked.
Ripple Has Enemies Everywhere
The case against Ripple isn’t a new one. It revolves around XRP and its status as a security. Several other large-cap cryptos – including Bitcoin and Ether – have also been the subject of such debates in the past. However, XRP has come under fire recently due to Ripple’s handling of it.
Currently, Ripple Labs holds an escrow account with about 50 billion XRP – nearly half the total supply in circulation. The company can mint and burn tokens at will, leading many to criticize its operation as being centralized. It has faced several class-action lawsuits from disgruntled investors as well, although it has managed to remain functional.
Defending its stance, Ripple published a Wells submission recently, claiming that the SEC plans to cherry-pick XRP as a security. The firm pointed out that by labeling XRP a security and not Bitcoin or Ether, the agency is destroying U.S.-based, consumer-friendly innovation.
Ripple alleged – without any evidence – that Ether and Bitcoin are Chinese-controlled assets, which the SEC has refused to term as securities. If the agency’s suit against it is successful, innovation would eventually be ceded to the United States’ chief economic rival.
We’ll have plenty of time to talk about the merits of the SEC’s Ripple enforcement action after the complaint comes out.
Right now, the big question is if centralized exchanges delist XRP while the case is pending.
I bet a lot of lawyers are setting emergency calls right now.
— Jake Chervinsky (@jchervinsky) December 22, 2020
While Garlinghouse is batting up the hatches, the industry is also reacting. Many have accused Ripple of being scammers, claiming that it dumped and focused on other business aspects. Jake Chervinsky, the general counsel at decentralized finance protocol Compound Finance, also raised the possible issue of exchanges delisting XRP going forward.