The U.S. Securities and Exchange Commission (SEC) intends to sue Ripple over its sale of XRP, Ripple CEO Brad Garlinghouse said Monday. Ripple’s cryptocurrency XRP is now the third largest cryptocurrency by market cap, with a market valuation at $23 billion.
Garlinghouse told Fortune Magazine that the SEC will name him and co-founder Chris Larsen as co-defendants in the lawsuit. Garlinghouse expects the SEC will file a lawsuit soon against the company over the alleged sale of unlicensed securities.
The SEC has not filed the lawsuit as of the time of writing.
If the SEC does sue Ripple, the action will follow years of controversy between the company and the SEC about whether XRP is a security or a currency. If the digital currency associated with Ripple is a security, then it must be registered with the agency.
Is XRP A Security Or Not?
The SEC ruled Bitcoin (BTC) and Ether (ETH) are not securities, because there is no person in control of them. In contrast, XRP has no mining or miners in its process. In 2012, Larsen created 100 billion XRP tokens for Ripple Labs, which maintains 55 billion XRP in escrow, releasing 1 billion every month. Additionally, Garlinghouse and Larsen each own a significant amount of XRP.
Thus, some view XRP is more like a company’s stock than a currency, a claim Ripple has pushed back for years. According to Garlinghouse, the SEC regarding XRP as a security under Ripple’s control is akin to viewing oil as a security controlled by Exxon.
“It’s not just Grinch-worthy, it’s shocking,” Garlinghouse said Ripple will fight the case. “It’s an attack on the entire crypto industry and American innovation.”
“We have to stand up for all of crypto — not let the SEC bully the entire industry,” said Garlinghouse. “We’re going to be on the right side of history.”
Previously, the SEC won a case involving the messaging app Kik, which issued crypto tokens to its customers. The judge in the case declared that the tokens in question were unlicensed securities. Kik later settled the case.