Why Ripple’s SEC Lawsuit Could Have a Lasting Impact on Crypto

By: MRT Desk

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The value of Ripple is being affected by the ongoing lawsuit filed by The U.S. Securities and Exchange Commission (SEC). This cryptocurrency was initially designed to provide fast and low-cost clearance of global transfers. Now, it has turned out to be a time bomb with a long fuse.

According to the plaintiff, the company was fully aware that launching XRP was essentially an illegal IPO — offering an unregistered security. According to the Ripple SEC agreement, the fintech company will provide six years’ worth of internal correspondence to prove that it did not know this complication. The lawsuit’s outcome can have a lasting influence on the entire crypto market. 

Implications for the Crypto Market

Ripple Labs was sued by the regulator in December 2020, eight years after its coin appeared in circulation. This case reflects the general obscurity of regulation around the digital currency market. It highlights the conflict between the conventional legal frameworks dating back to the Great Depression and the vibrant fintech ecosystems of today.  Whether the SEC has a strong case is debatable, but nearly everyone agrees that there is a deeper underlying problem.

We are yet to see a clear legal framework that would regulate digital currencies without sabotaging the industry. Regulators need a transparent approach to investors and businesses that may not have known that they ran afoul of the law. Cryptocurrencies have only been around for over a decade, and investors are following the case closely, as it could affect the entire industry.

Latest Developments

  • In October 2021, the Court granted Ripple’s motion to seal the ’privilege logs’ provided with its response to the older filing. Now, it is the defendant’s turn to face the music. 
  • Previously, Ripple Labs was directed to search the video and audio recordings relevant to the case and provide documents of its internal meetings regarding the discovery demands. The results were deemed “inadequate under the circumstances.” 
  • According to the judge, Magistrate Sarah Netburn, human review of 64,000+ recordings was “unreasonable,” and “automated transcriptions of recordings, and further use of search terms” were required. The court has advised the parties to meet and agree on a timeline when the recordings could be most responsive.
  • This was a major blow for Ripple, but the next big order is expected to concern the SEC’s motion to strike the Fair Notice Defense. 

The XRP community members are now divided. Some of them note that Ripple will be effectively “dead” if the SEC wins. However, regardless of the legal woes, the fintech firm has made significant progress lately thanks to new partnerships and the price action of XRP. The lawsuit is expected to drag on until spring 2022.