Late 2020 the US SEC filed an action against Ripple Labs Inc and two individuals alleging they had raised over $1.3 billion through an unregistered ongoing digital asset security offering of the XRP virtual currency in breach of the Securities Act 1933. The SEC regulates assets that are securities such as stocks and shares but not commodities.

Ripple is a finance tech company and XRP is the native currency of the XRP blockchain ledger. Ripple was given 80% of the 100 billion XRP that was created by Ripple’s founders. Ripple has sold and gifted some and it is sold on exchanges. XRP is not a share in Ripple. It is used as a bridge currency for cheap fast cross-border payments. The SEC action had huge consequences for Ripple, the price of XRP and investors. Exchanges such as Coinbase delisted XRP and it became difficult for US residents to buy it.

After nearly 2 years of intense litigation the parties have filed summary judgment applications.  

The parties’ approach in their filings could not be more different. The SEC does not argue the XRP token is a security per se rather they argue it was marketed and sold as a security. The Defendants   argue the law requires an investment contract for an asset to be a security and Ripple has no ongoing obligation to XRP holders. They argue that the SEC have failed to make the case XRP under the 1946 Supreme Court Howey test and accuse the SEC of regulatory overreach.  

Summary Judgment can be used when there is no serious dispute as to any material facts and where a party can establish they are entitled to a judgment as a matter of law. The defendants’ submissions on American securities law make out a powerful case for judgment in their favour. The majority of SEC actions end in settlement with money paid to the SEC. Commentators have suggested a possible settlement could be reached with the defendants accepting that they breached security laws with regards to some of the early marketing but without any finding that XRP is itself a security. A settlement would avoid a high profile loss for the SEC which could inhibit its ability to still regulate by enforcement. Post settlement it could devote more of its resources to pursuing crypto fraudsters and scams. Unusually for a confident plaintiff the SEC have repeatedly delayed the case. Whilst it would likely appeal an unfavourable summary judgment ruling an appropriate settlement sooner rather than later would arguably be in its and the public interest. That however does not necessarily meet with Mr Gensler’s goals.

Richard Halsall


BridsonHalsall Advocates
Havelock Chambers
16-18 Mount Havelock
Isle of Man
Telephone: +44 1624 614422