Ripple’s Legal Struggles and Resilience
In a recent talk at the University of Kansas School of Business, Ripple CEO Brad Garlinghouse disclosed that the company was on the brink of closure in the wake of a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) in December 2020. He revealed that both he and co-founder Chris Larsen contemplated the drastic measure of dissolving the business and distributing their holdings of XRP to shareholders on a pro rata basis. Garlinghouse referred to this option as the more straightforward response to an agency armed with “infinite power and resources.”
However, the decision to proceed with legal action instead emerged from their desire to preserve jobs within the company, as they had a workforce reliant on Ripple’s continued operation.
“I’m glad in retrospect, but that was not obvious at the time,”
Garlinghouse stated, reflecting on their difficult choice amidst considerable uncertainty. The legal battle, he noted, has cost Ripple approximately $150 million.
SEC Allegations and Court Rulings
The SEC had accused Ripple along with Garlinghouse and Larsen of engaging in unregistered security sales through the issuance of XRP, claiming that Ripple raised over $1.3 billion through these actions. This not only put immense pressure on Ripple’s U.S. business operations but also affected its partnerships and ability to engage with institutional clients, leading to years of ambiguity regarding how federal securities law would apply to XRP transactions.
In the years leading up to the lawsuit, Garlinghouse also shared that he had multiple meetings with SEC representatives—from 2017 to 2019—without legal counsel, during which no one indicated that XRP might be deemed a security. This lack of guidance played a significant role in Ripple’s decision to mount a legal defense against the SEC’s allegations.
The situation progressed to the courts, where a ruling by Judge Analisa Torres in July 2023 found that while Ripple’s programmatic sales of XRP on public exchanges did not constitute securities transactions, some direct sales to institutional entities were indeed violations of securities laws. The court subsequently imposed a $125 million civil penalty on Ripple and restricted its opportunities for future unregistered institutional sales.
Settlement Attempts and Future Outlook
Post-ruling, Ripple sought to resolve the ongoing disputes with the SEC in 2025, proposing to lower the penalty to $50 million. However, this settlement was rejected by Judge Torres due to the earlier final judgment. Consequently, both parties announced that they would abandon their appeals, resulting in the closure of the case by the Second Circuit in August 2025. While the appeals ended, they did not nullify the original judgment, and Ripple remained bound by the sizable penalty and ongoing injunction concerning their institutional XRP sales.
Despite these challenges, Ripple continued to grow and adapt, recently obtaining a comprehensive Markets in Crypto-Assets license in Luxembourg, which will enable the company to provide regulated crypto services throughout the European Economic Area, offering them a more defined framework for operations compared to what they face in the United States.
As U.S. lawmakers remain embroiled in discussions about market structure regulations that could clarify the classification of digital assets as securities or commodities, Ripple’s journey highlights the prolonged impact of regulatory pressures on strategic business decisions. Emphasizing their resilience, Ripple has not only survived the legal onslaught but also retained its workforce while expanding international operations, even as the implications of the final court ruling linger.
