- Ripple Labs has been battling the SEC over its proposed $2 billion penalty.
- Ripple argues that a recent SEC settlement has set a fairer penalty standard.
- Ripple’s legal officer suggests that the SEC has prioritized headlines over fair penalties.
Ripple Labs, the company behind the XRP cryptocurrency, is arguing that a proposed $2 billion penalty from the Securities and Exchange Commission (SEC) is excessive. They point to the recent settlement between the SEC and Terraform Labs, the company behind the Luna token, as evidence of a more appropriate penalty range.
Ripple Cites Terraform Labs Settlement
The SEC alleges that XRP is an unregistered security and sued Ripple Labs and its executives in late 2020. The lawsuit has been ongoing ever since, casting a shadow over the cryptocurrency’s future.
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In a recent letter filed with the court, Ripple argues that the $4.5 billion settlement reached with Terraform Labs demonstrates a more reasonable penalty structure. While the alleged investor losses in the Terraform Labs case were significantly higher – estimated at $40 billion – the SEC ultimately settled for a total of $4 billion, including disgorgement and civil penalties.
Ripple highlights that this translates to a civil penalty of only 1.27% of Terraform Labs’ gross sales. They further argue that in past cases, the SEC has typically settled for civil penalties ranging between 0.6% and 1.8% of the defendant’s gross revenue.
Significantly, Ripple underscores the absence of any fraud allegations in their case. They argue that the SEC’s proposed $2 billion penalty, which includes significant disgorgement and a hefty civil penalty, far exceeds the range typically applied in similar situations without fraud charges.
Ripple’s CLO Questions SEC’s Motives
Commenting on the Terraform Labs settlement, Stuart Alderoty, Ripple’s chief legal officer, took to Twitter to question the SEC’s approach. He expressed concerns that the SEC prioritizes public perception over sound policy, suggesting their focus lies in securing headlines rather than achieving meaningful outcomes.
The lawsuit has undoubtedly impacted XRP’s market standing. At the time of the lawsuit, XRP was the third-largest cryptocurrency, boasting a market capitalization of $20.7 billion. While its market cap has grown to $26 billion today, it has slipped to the eighth position due to the rise of other cryptocurrencies.
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The outcome of the SEC vs. Ripple lawsuit will have significant implications for the entire cryptocurrency industry. A favorable ruling for Ripple could provide much-needed clarity on the regulatory landscape for digital assets.
On the Flipside
- The SEC might argue that a higher penalty for Ripple is necessary to deter future violations within the cryptocurrency industry.
- The SEC could point out that the Terraform Labs case involved a stablecoin, which is potentially a different regulatory category from XRP.
Why This Matters
If Ripple convinces the court that the SEC’s proposed penalty is excessive compared to similar cases, it could set a more lenient precedent for future SEC actions against crypto companies. This could significantly impact the industry by reducing regulatory uncertainty and potentially leading to a more welcoming environment for cryptocurrency innovation.
If you’re interested in learning more about the lawsuit, you can read this article which dives into the upcoming verdict and the possibility of an appeal:
XRP Lawsuit Heats Up with Judge’s Ruling and Appeal in Focus
You might also be interested in this article about Ripple’s announcement of a new stablecoin, RLUSD, which will be available on both the XRPL and Ethereum blockchains:
Ripple’s RLUSD Stablecoin and EVM Sidechain Ignite XRP Buzz
