Ripple CEO’s Bullish Crypto Firm Will Receive SEC-XRP Lawsuit Decision Soon

Ripple CEO confident in SEC case closing in first half

The head of cryptocurrency and blockchain company Ripple, Brad Garlinghouse, says he hopes a settlement in the dispute with the US Securities and Exchange Commission will be reached in the first half of 2023.

“Judges take as long as judges take,” Garlinghouse, a defendant in the legal drama, said in an interview with CNBC’s “Squawk Box Europe” Wednesday at the World Economic Forum in Davos, Switzerland. “We are optimistic that this will certainly be resolved in 2023, and maybe [in] the first half. So we’ll see how it plays from here. But I have a very good feeling about where we are in terms of the law and the facts.”

The U.S. Securities and Exchange Commission launched a lawsuit against Ripple in 2020, alleging that the company and its executives sold illegally XRP – a cryptocurrency created in 2012 – to investors without first registering it as a security.

Ripple denies the claim, stating that the token should not be considered an investment contract and is used in its business to facilitate cross-border transactions between banks and other financial institutions.

In December, Ripple and the SEC filed their latest round of briefs seeking summary judgment on the case, accusing each other of over-extending the law.

The judge could rule in favor of either side, avoid a trial, or submit the matter to a jury.

Ripple CEO Brad Garlinghouse speaks during the Milken Institute Global Conference in Beverly Hills, California on October 19, 2021.

Kyle Grillot | Bloomberg | Getty Images

Garlinghouse said he expects a ruling to arrive “sometime in the coming single digits” — possibly as early as June. He added that he doesn’t expect the company to settle the case, although he remains open to the prospect.

“We have always said that we would like to reach an agreement, but it requires one very important thing and that is that it is clear that XRP is not a security,” Garlinghouse said. “The SEC and Gary Gensler have very bluntly said that he considers almost all cryptos collateral. And that leaves very little room in the Venn diagram for settlement.”

At a September event of the Practicing Law Institute, Gensler said that the “vast majority” of cryptocurrency tokens are securities.

He then hinted that Ether could also qualify as a security. Without naming it, Gensler told reporters in September that crypto “staking” mechanisms — which reward users who deposit their tokens on secure blockchain networks with interest-like payments — should be considered security offerings because “the investing public expects gains based on the efforts of others.” Ethereum, the network behind the world’s second-largest cryptocurrency, switched to such a model last year.

The only cryptocurrency the agency has made clear is that bitcoin is not considered a security. Gensler previously explained that the world’s largest cryptocurrency “doesn’t have a group of individuals in the middle,” meaning investors aren’t “betting” on an intermediary.

Ripple CEO: 2022 will go down in history as one of the worst years for crypto

The XRP case has important implications for both Ripple and the broader crypto market.

A ruling declaring XRP a security could potentially impose much stricter restrictions on Ripple on the token. This could include requirements for transparency disclosures and better investor protection, similar to those imposed on regulated broker-dealers.

It could also set a precedent for dozens of other crypto and blockchain projects that could potentially be classified as securities.

Emphasizing the importance of the lawsuit’s outcome, Garlinghouse said Wednesday, “I’ve heard repeatedly here in Davos how important this is not just to Ripple… but really to the entire crypto industry in the United States.”

He added, “I keep reminding people that crypto is still thriving outside of the United States, Ripple is still thriving, and we should make sure we continue to engage with regulators outside of the United States.”

“Awkward” behavior

In a separate fireside chat with CNBC’s Arjun Kharpal on Wednesday, Garlinghouse issued a stern rebuke of the SEC’s litigation with his firm, saying the watchdog’s past behavior has been “embarrassing.”

“I thought from the start that it’s very clear that the facts are on our side, that the law is on our side,” he said. “And I think since you’ve seen this game, as you’ve seen the court case files, the judge will certainly hear our arguments.”

Ripple CEO: SEC conduct in XRP lawsuit was'embarrassing'

He continued, “The behavior of the SEC in some cases was embarrassing for a US citizen. Just some of the things that happened like you have to be joking.”

He said the US is “remarkably absent” from the list of regulators developing crypto-friendly rules. In his view, the United Arab Emirates, Japan, Singapore, Switzerland and the United Kingdom are among the pioneers in this respect.

As part of the court case, Ripple fought to obtain documents related to a June 2018 speech by former SEC official Bill Hinman that allegedly supported the case. In the speech, Hinman says that the sale of rivals Ethers “are not security transactions.”

XRP was once the third largest cryptocurrency, with a market value of $120 billion in early 2018. Since then, it has fallen sharply due to US regulatory scrutiny and a broader downturn in Bitcoin and other digital currencies. According to CoinMarketCap data, XRP now has a market cap of around $20 billion. Ripple CEO’s Bullish Crypto Firm Will Receive SEC-XRP Lawsuit Decision Soon

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