The long-standing lawsuit between Ripple and the SEC is about to come to a conclusion. Who will emerge victorious in the "securities dispute"?

Recently, there have been reports in the cryptocurrency community that the lawsuit between Ripple and the SEC may reach a conclusion in June or July of this year. This legal battle, which has lasted for more than two years, not only concerns Ripple's future but could also have a profound impact on the regulatory landscape for cryptocurrencies in the United States.

As a result of this news, the price of XRP saw a significant increase last week. However, this week the XRP price unexpectedly fell to its lowest point since March. Clearly, this pending lawsuit has been a key factor affecting the trend of XRP. As the case approaches its conclusion, market sentiment is becoming increasingly unstable, and investors are paying more attention to the direction and possible outcomes of this protracted battle.

The Three-Year Litigation Journey of Ripple and the SEC

The dispute dates back to December 2020, when the SEC charged Ripple with violating federal securities laws. The SEC believes that Ripple and its founders profited from the sale of XRP, which constitutes a securities transaction, but Ripple did not register XRP as a security. Under federal securities laws, all issuances and sales of securities, including those involving digital assets, must be registered or exempted as required.

As early as 2019, the SEC issued a framework based on the Howey test to determine whether digital assets are securities. The SEC's view is that if the development of a digital currency relies on the efforts of a specific company and investors expect to profit from it, then such a digital currency should be considered a security. Conversely, if a digital currency is sufficiently independent and decentralized, such that no participant can influence its operation and investors do not have an expectation of profit, then it does not fall under the category of securities.

Clearly, within this framework, centralized currencies like XRP can easily be classified as securities. However, Ripple insists that XRP should not be viewed as a security when used as a cross-border payment tool.

Since then, both parties have engaged in a protracted legal tug-of-war, with the core argument always revolving around the question of "Is XRP a security?" As of March this year, both sides are still defending their respective positions.

The SEC chairman believes that the SEC has the authority to determine which digital assets are considered securities without the need for legislation. He stated that the current securities laws already cover most activities in the crypto market. Meanwhile, the CEO of Ripple insists that such decisions should be based on legislation rather than the personal views of the SEC chairman.

Why has the controversy lasted so long?

The core of this years-long debate revolves around whether "the issuance of XRP is for the purpose of sale." From a broader perspective, the dispute also involves "who has the authority to determine whether a digital asset is a security." This is an important issue concerning the interests of crypto companies and exchanges; for U.S. regulators, it is a struggle for regulatory power. The outcome of this dispute will set the tone for future U.S. crypto regulation and will also affect the direction of the entire crypto market.

Ripple's cross-border payment business is divided into two lines: one involves XRP and the other does not. However, only the business line involving XRP is truly profitable. Some believe that Ripple has achieved rapid growth through the marketing of XRP's liquidity payment technology (ODL). In response, Ripple's Chief Technology Officer argued that the company's goal is simply to promote the widespread use of XRP, not to sell it for profit.

The SEC chairman has a very tough stance on the cryptocurrency industry, criticizing the compliance of the sector and expressing concerns over stablecoin regulation. He insists that the digital asset market requires stricter regulation to protect investors' interests and the public's trust in capital markets. Meanwhile, Ripple is worried that if XRP is deemed a security, it will face stringent regulation, which could hinder crypto innovation.

Who has a better chance?

The price fluctuations of XRP reflect, to some extent, investors' expectations regarding the outcome of the lawsuit. Previously, there were reports that Ripple might win the case, and XRP subsequently rose by more than 20% within 24 hours. Some industry insiders believe that Ripple has a high chance of winning the lawsuit, which has also driven up the price of XRP.

However, some lawyers involved in the lawsuit believe that this case may end in a tie. This is because the SEC's own experts acknowledge that since mid-2018, the price fluctuations of Bitcoin and Ethereum can explain up to 90% of the XRP price changes. This contradicts the SEC's view that Ripple Labs holding a high proportion of XRP means that XRP is a centralized security.

The final ruling of this lawsuit is expected to be announced in the coming weeks. Nevertheless, the XRP community remains optimistic about the current situation. They believe that, given the inconsistent stance of regulatory agencies, it is unlikely that the judge will fully support the SEC's viewpoint.

Regardless of the final outcome, this three-year legal dispute will have a profound impact on the cryptocurrency industry and provide important references for future regulatory practices.