XRP rose 20,12% in 24 hours, from $0.392 to $0.491. Thus, the asset hit a four-month high, which is explained by optimistic investor sentiment amid the ongoing lawsuit between Ripple and the U.S. Securities and Exchange Commission (SEC). Whether the company has a chance to win, we’ll consider further below.
Digging back in time: What the Ripple vs. SEC trial is all about
It all started in late 2020, when the SEC accused Ripple of raising $1.38B by selling XRP. That would have been fine, but the department saw the tokens as an unregistered security. However, the company’s leadership disagrees.
The accusations affected the value of the native token because a number of cryptocurrency exchanges paused trading in XRP. The price of the asset then dropped to $0.17.
In simple terms, the SEC argued that XRP is not a cryptocurrency such as Bitcoin or Ethereum but a security. That’s why the company’s management was required to register its token before trading it.
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The regulator primarily explains its actions in terms of its desire to “prevent fraud” and “protect potential investors from losses.” That’s why the SEC sees a solution to the problem in registering the Ripple token “appropriately,” as well as for management to expose all financial information about the issuance of the token into circulation.
This lawsuit is interesting because it is not the first time the SEC has sued a cryptocurrency company. However, as a rule, respondents more often than not prefer not to deal with it and simply comply with the regulator’s requirements and pay the fine. In 2020, for example, the SEC charged various industry participants more than $4.68. Therefore, it can be considered that Ripple is one of the first companies to stand up to the SEC with a firm intention to win.
What’s happening now?
The lawsuit has been going on for more than two years. The main tool that the SEC uses as evidence is the Howey Test, which can be used to determine whether an asset is a security or not.
But the regulator’s accusations, according to some experts, look unconvincing. In September 2022, for example, Ripple’s attorneys filed a lawsuit,noting that the SEC had “inconsistent” charges. For example, a former top regulator manager, William Hinman, publicly argued that Bitcoin and Ethereum are not securities. And the regulator, when asked by the court to disclose internal documents related to the above statement, referred to their confidentiality.
SEC Chairman Gary Gensler himself pointed to the possibility that XRP could be used as an intermediary currency between banks.
“You could use blockchain but you need a bridge currency in between and that bridge could be a currency like Ripple has…” (2018)
– Gary Gensler, SEC Chairman
— XRP_Cro (@stedas) March 21, 2023
Now that all the evidence has been heard, the court is expected to reach a verdict soon.
How might the outcome of this lawsuit affect the industry?
This case is very important for the whole industry. And what happens next will directly depend on what the court decides.
If the court finds that XRP is a security, then by definition, all other cryptocurrencies are securities as well. Then all digital assets will fall under the control of the SEC, and this applies to the regulation of both ordinary token producers and large organizations. In particular, market participants could be required to register their products, report, and trade only with the regulator’s approval.
However, there are disagreements between different regulators. Thus, after the SEC filed a lawsuit against the KuCoin exchange on March 9, in which they claimed that Ethereum is a security, the Commodities and Futures Trading Commission (CFTC) said that ether is a commodity, so it should fall under their control.
But even if it loses, Ripple has already announced that it will appeal. At the same time, the current sentiment suggests that the company has a chance to win. For example, according to CryptoLaw founder John Deaton, Ripple may be able to win because the SEC was underprepared and provided insufficient evidence.
Think of how arrogant the SEC is to claim that if a foreign country deems something legal tender, it will still be a security.
The way the Judge could give Ripple an outright victory is simply reject the SEC’s sweeping claims and say you didn’t prove any specific transaction.
— John E Deaton (@JohnEDeaton1) January 20, 2023
What the final verdict will be is not yet clear, but the fact is that the market one way or another will be affected.
Pump of the day: current XRP’s price and predictions
So far, the news alone that Ripple might win has been enough to cause the token to increase by 20% overnight. This came after judge Analisa Torres ruled out a comment from an expert witness, on whom the regulator apparently relied heavily.
— CryptoBusy (@CryptoBusy) March 22, 2023
At the time of writing, the asset is down from its peak after the news and is trading at $0.4517. However, according to a TARA trader’s technical analysis, there is a possibility that “the next stop for XRP is $0.57.”
Next stop for #XRP is $.57! This should line up with #BTC Wave 3 at $35.4k. Wave 3 likes to extend, especially if we get heavy volume.. bullish targets can reach as high as $.83 on this wave! I’ll keep you updated #XRP $XRP #Ripple pic.twitter.com/gzS8lIb6QR
— TARA (@PrecisionTrade3) March 14, 2023
But there are those who believe that the current growth of XRP is a bull trap and will soon dump the token.
— Toni Ghinea (@ToniGhinea) March 21, 2023
Which of the predictions is correct is hard to say, but XRP will definitely fluctuate in the near future. Waiting for the court’s decision!
Do you believe Ripple will win the lawsuit against the SEC?