Crypto company Ripple announced on Monday that it’s expecting a lawsuit from the U.S. Securities and Exchange Commission over its sale of XRP, the cryptocurrency it created.
Why it matters: If filed, it would be the highest-profile lawsuit of its kind. The SEC has sued a number of cryptocurrency companies in recent years over what it has deemed illegal sales of securities.
The big picture: Whether digital tokens — like XRP — are securities has been the central question regulators and the industry have been wrestling with in recent years.
- SEC officials have declared Bitcoin and Ether to be currencies, as they are decentralized in their management, but have left the door open for others to qualify as securities, especially at the time of their issuance.
- Yes, but: XRP is in a different situation. While it’s widely traded, its originator, Ripple, is still very much involved and owns a significant portion of the currency (though it’s held in reserves to be sold over time, which the company says it doesn’t have control over).
- XRP is currently the third most valuable cryptocurrency, with a market cap of about $22 billion.
What they’re saying: “Make no mistake, we are ready to fight and win – this battle is just beginning,” Ripple CEO Brad Garlinghouse tweeted with regards to the announcement, which was first reported by Fortune.
The bottom line: The potential lawsuit could have a significant impact in shaping the regulatory environment for digital tokens.