What Is the Ripple vs SEC Lawsuit? Full Timeline and Outcome Explained

The Securities and Exchange Commission vs Ripple Labs was one of the most consequential legal cases in cryptocurrency history. Filed in December 2020, it consumed four years, cost hundreds of millions in legal fees, and produced a ruling that fundamentally shaped how US regulators think about crypto assets.

The SEC’s Case Against Ripple

In December 2020, the SEC filed a lawsuit alleging that Ripple had conducted an unregistered securities offering by selling XRP tokens to investors. The SEC argued that XRP met the definition of a security under the Howey Test — an investment of money in a common enterprise with an expectation of profits from others’ efforts.

The SEC further alleged that Ripple’s founders — CEO Brad Garlinghouse and executive chairman Chris Larsen — personally sold $600 million worth of XRP without proper disclosure. The agency sought disgorgement of profits and civil penalties.

The lawsuit was significant beyond Ripple: if XRP was a security, it implied that many other cryptocurrencies might also be unregistered securities — a potential regulatory crisis for the entire industry.

Ripple’s Defence

Ripple argued that XRP is a currency or commodity, not a security. The company pointed to the fact that XRP existed before Ripple Labs was involved in its development, that XRP trades on its own without depending on Ripple’s efforts, and that the SEC had never previously suggested XRP was a security despite years of awareness.

Ripple also used a “fair notice” defence: how could the company be held liable for selling an unregistered security when the SEC had never clearly communicated that XRP was one?

The July 2023 Ruling: A Split Decision

In July 2023, Judge Analisa Torres delivered a landmark ruling that split the baby. XRP itself is not a security, she ruled — it is a digital token that can be sold in ways that do and do not constitute securities offerings depending on context.

Specifically: Ripple’s institutional sales of XRP directly to hedge funds and sophisticated investors were securities offerings (because buyers had a reasonable expectation of profit from Ripple’s efforts). But XRP sold to retail investors through exchange trading platforms were not securities offerings (because retail buyers generally did not know they were buying from Ripple and had no expectation of profit tied to Ripple’s efforts).