On January 24, 2025, the legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) intensified as Better Markets filed an amicus curiae brief supporting the SEC's appeal against a pivotal 2023 district court ruling. This ruling had determined that Ripple's XRP sales to retail investors on exchanges did not breach U.S. securities laws, a decision that Better Markets and the SEC argue misapplied the Howey Test, thereby jeopardizing investor protections.
The SEC initially sued Ripple in December 2020, alleging that the company raised $1.3 billion through unregistered XRP sales. Although the July 2023 ruling partially favored Ripple, the court later found the company liable for $125 million in institutional XRP sales. The SEC formally appealed the retail sales decision in October 2024, claiming Ripple's marketing created profit expectations among buyers, fulfilling the Howey Test's criteria for investment contracts.
Better Markets criticized the district court's reasoning, asserting that XRP transactions on secondary trading platforms should still be classified as securities. The organization emphasized that the ruling could create a loophole favoring institutional investors while leaving retail buyers unprotected, citing Ripple's marketing strategies that aimed to convince investors of XRP's profit potential linked to Ripple's efforts.
Ripple's financial position appears robust, with its XRP holdings increasing in value by $125 billion since Donald Trump's re-election. CEO Brad Garlinghouse's recent meeting with Trump has fueled speculation regarding Ripple's political influence and a potential resolution to the SEC case. Additionally, the appointment of Mark Uyeda as Acting SEC Chair, perceived as more crypto-friendly than his predecessor, has sparked further speculation about a near settlement.
Better Markets warned of broader implications if the ruling is upheld, stating it could undermine the SEC's ability to regulate cryptocurrency markets and protect investors. The case has drawn significant attention within the cryptocurrency and financial sectors, potentially setting a precedent for digital asset classification under securities laws. Ripple President Monica Long's recent comments about the possibility of XRP-based ETFs, along with Ripple's growing valuation, have kept XRP in the spotlight, with its price recently reaching $3.15. The outcome of the SEC's appeal may reshape the regulatory framework for cryptocurrencies and determine the future of Ripple's operations.