The legal battle between Ripple and the SEC is about to come to a conclusion. Who is more likely to win?

The Ripple vs. SEC lawsuit, which has lasted for more than two years, is about to reach a conclusion. This highly anticipated case will not only impact the direction of cryptocurrency regulation in the United States but may also change the landscape of the entire cryptocurrency market.

Recently, the price of XRP has experienced significant fluctuations. Last week, the price of XRP briefly rose, attempting to break through the support level. However, this week, the price fell below market expectations, reaching its lowest level since March. As is well known, the pending lawsuit is a key factor affecting the price movement of XRP. As the case nears its conclusion, market sentiment has become increasingly unstable, and people are paying more attention to the direction and outcome of this long-standing tug-of-war.

Ripple vs. SEC's 3-Year Lawsuit is About to Come to a Close

The case dates back to December 2020, when the SEC sued Ripple for violating federal securities laws. The SEC believes that Ripple and its founders engaged in the sale of XRP to investors for profit, which constitutes a securities transaction, but Ripple did not register XRP as a security. Under federal securities laws, all issuances and sales of securities, including securities involving digital assets, must be registered or qualify for an exemption from registration.

The SEC released a "Framework Analysis of Digital Asset 'Investment Contracts'" based on the Howey Test to determine whether digital assets are securities. The framework indicates that if the development of a digital currency relies on the efforts of a specific company and investors expect to earn a reasonable profit from their investment, then the digital currency will be considered a security. Conversely, if a digital currency is sufficiently independent and decentralized, with no participant able to influence its operation, and investors do not form expectations of profit, then the digital currency will not be classified as a security.

It is clear that under this framework, XRP, a relatively centralized currency, can easily be viewed as a security. However, Ripple insists that its cross-border payment coin is not a security. The two parties then engaged in a nearly three-year legal tug-of-war, with the focus of the debate always revolving around the question of "Is XRP a security?"

The SEC chairman stated that the SEC has the authority to determine which digital assets are securities and believes that the current securities laws cover most activities in the crypto market. However, the CEO of Ripple argues that such decisions should be based on legislation rather than the personal views of the SEC chairman.

Recently, professionals have stated that the lawsuit by the U.S. SEC against Ripple will have a final ruling in the first half of the year.

Why has the "securities dispute" between Ripple and the SEC lasted so long?

The ongoing debate between the two parties has mainly revolved around the topic of "whether the issuance of XRP is for the purpose of sales." From a broader perspective, the dispute is more about "who has the authority to decide whether a digital asset is a security." For crypto companies and exchanges, this is a struggle for interests; for U.S. regulators, it is a game of regulatory power. This dispute will set the tone for future regulatory rules in the U.S. and will also affect the future direction of the crypto market.

A report reveals that Ripple sold a large amount of XRP through major partners and points out how Ripple embellishes data to market its core business. Ripple's core business is cross-border payments, divided into two lines: one using XRP and the other not. However, only the XRP line is truly profitable. Ripple achieved rapid growth by marketing its liquidity payment technology (ODL) for XRP.

The Chief Technology Officer of Ripple stated that what the company is doing is merely aimed at making XRP as widely used as possible, not to profit from sales. He believes that Ripple can profit and sustain operations simply because it is fortunate enough. Therefore, it is difficult to definitively determine whether "XRP is intended for sale" in this type of business.

The SEC chairman expressed dissatisfaction with the myriad and complex operational models of cryptocurrencies, believing they easily foster gray areas. He criticized the compliance of cryptocurrencies and expressed concerns about the regulation of stablecoins. He emphasized that if cryptocurrency tokens are considered securities, any exchange trading such tokens would need to register as a national securities exchange and be subject to SEC oversight.

The SEC chairman insists on maintaining the existing regulatory standards, believing that the digital asset market needs to be more compliant to protect investors and maintain public trust in capital markets. Ripple, on the other hand, argues that if XRP is classified as a security, it would have to undergo strict regulation, which could stifle crypto innovation.

The entire Ripple-SEC lawsuit reflects the current state of the cryptocurrency market in the United States: an emerging market that still has many gray areas in legislation and regulation. The scope and responsibilities of regulation are unclear, and the expectations of cryptocurrency companies regarding regulation are also unstable. The cryptocurrency market still needs a clearer regulatory framework to reduce potential market chaos, and the outcome of this lawsuit will become an opportunity for regulatory reform in the cryptocurrency space.

Which side is more likely to win?

The fluctuations in the crypto market are very sensitive, and the price of XRP can be seen as a reflection of investor sentiment towards this lawsuit. Reports previously indicated that Ripple might win its lawsuit against the SEC, and the XRP token rose by over 20% in the following 24 hours. Some prominent figures have expressed support for the impending conclusion of the Ripple-SEC lawsuit, believing that Ripple is very likely to win the case, which has also driven up the price of XRP.

However, a lawyer involved in the litigation believes that the SEC and Ripple lawsuit may end in a tie. SEC experts acknowledged that since mid-2018, the prices of Bitcoin and Ethereum can explain up to 90% of XRP price fluctuations. Yet, the SEC also argues that Ripple Labs holding a high proportion of XRP means that XRP is centralized and is a security. There is a contradiction between these two statements and positions.

The ruling on this lawsuit is expected to be announced in a few weeks. Overall, the XRP community remains optimistic about the current situation. They believe that the regulators' stance is inconsistent, and the judge is unlikely to support the SEC as a result. In any case, all parties will actively fight for their interests. It is only when the final ruling is made that this three-year dispute can truly come to an end.