The SEC lawsuit threatens XRP

In December 2020, XRP (XRP) was under existential threat. But what almost killed it now appears to be its greatest strategic advantage. A US Securities and Exchange Commission bombshell on Dec. 22, 2020, caused XRP to crash 62%. It led to mass delistings and put the cryptocurrency in a legal grey area.

The lawsuit against XRP operator Ripple Labs alleged that it had conducted the sale of $1.3 billion worth of securities since 2013. At the time, it was the final days of the first Trump administration, and it caught the crypto industry off guard.

But five years later, the litigation has finally been concluded. On Aug. 7, 2025, both parties dropped their appeals. It put XRP in a landmark position.

The coin now has something that many of its competitors crave: definitive legal clarity.

It is officially not a security when sold on public exchanges. This is a stunning reversal of position for Ripple, as XRP has transformed from a regulatory nightmare into a digital asset with explicit validation in the US.

Community mobilization behind XRP

Many cryptocurrency holders scoff at XRP, and even before the lawsuit, the term “XRP army” was thrown around as a derogatory term. Critics often mocked the token’s passionate supporters in this way.

However, the SEC litigation brought the community together and united this army. It became a rallying cry for one of crypto’s most organized movements.

Unlike many other cryptocurrencies, XRP is not completely decentralized and community-managed. It is operated under the watch of Ripple Labs. It is meant to be an integral part of Ripple’s modern blockchain cross-border payments infrastructure.

So, sitting on the right side of the law is crucial to long-term success. And this is a line that Ripple CEO Brad Garlinghouse would use as a rallying cry.

“We are not only on the right side of the law, but we will be on the right side of history,” he said in a December 2020 blog post.

Joining this legal mobilization was John Deaton, an attorney who emerged as a key figure who rallied over 75,000 XRP holders to support, submit affidavits and make testimonies in Ripple’s case. Over the years, the XRP army lobbied, petitioned and coordinated social media campaigns to keep the case in the public spotlight while simultaneously pressuring regulators.

Did you know? The XRP Ledger is lightning fast, with payments settling in five to 10 seconds worldwide. It feels instantaneous compared to Bitcoin, which takes over 10 minutes. 

Key legal victories along the way

It wasn’t until September 2022 that Ripple managed to strike its first significant victory. The courts pushed the SEC to release emails from former director William Hinman.

Internal contradictions in the SEC’s approach to cryptocurrency regulation struck a massive blow in their case.

There was particular focus on Ether’s (ETH) classification. The controversy centered around Hinman’s description of ETH as a “native token, not a security,” as it was sufficiently decentralized.

Documents in the Ripple lawsuit showed that SEC officials disagreed with this stance, and there were voices of inconsistency. If ETH isn’t a security, then why would XRP be?

A month later, Judge Analisa Torres dropped the most pivotal ruling to help create crucial legal distinctions:

  • Institutional sales: XRP sales to hedge funds and institutional buyers were classified as unregistered securities offerings.
  • Programmatic sales: XRP sold on exchanges was not a security. Retail buyers had no expectation of profits from Ripple’s efforts.

This is a nuance that gave Ripple a partial victory but helped establish XRP as a cryptocurrency, not inherently a security.

Ripple continued to accumulate victories throughout 2023. In August 2024, Ripple’s final penalty was set at $125 million. That’s 95% less than the SEC’s original $2.2 billion lawsuit.

Did you know? The XRP Ledger has processed around 2 million transactions per day so far in 2025. Weekly payments now exceed 8 million, an increase of 800% since 2023. 

XRP v. SEC case closed

With appeals rumbling on from both sides, it wasn’t until Aug. 7, 2025, that the case was finally closed. Both sides filed a joint dismissal from their ongoing appeals with the US courts.

Ripple chief legal officer Stuart Alderoty summed things up with a simple post on X: “The end…and now back to business.”

INSERT X POST HERE: https://x.com/s_alderoty/status/1953573082821799981

The final results put Judge Torres’ 2023 ruling into concrete and created a binding legal precedent:

  • XRP is definitively not a security when sold on exchanges.
  • It establishes the methodology for determining when crypto sales are deemed securities offerings (e.g., when offered to institutional buyers).
  • A $125-million fine, which is manageable for a company like Ripple, compared to its treasury reserves.

The market reacted as expected, with XRP surging 4.5% on the announcement, reaching $3. It marked massive growth in the coin’s value since the dark days of 2020, when it dropped to around $0.20.

Did you know? In April 2025, Ripple acquired Hidden Road, a prime broker, for $1.25 billion. It’s one of the largest M&A deals in crypto, providing deeper trading and liquidity capabilities for institutional clients. 

How the lawsuit strengthened XRP’s narrative

This final verdict has transformed XRP from a regulatory pariah to a cryptocurrency with official judicial validation.

Even the top two coins, Bitcoin (BTC) and ETH, must rely on informal SEC guidance. Although there are no official companies operating these coins, it would be challenging to file lawsuits against them either way.

For those who have supported XRP through the legal battle, it has created a fierce bond with a strong and organized user base that’s more committed than ever. Coming out on the right side of history proves their conviction after battling years of market adversity.

The legal victory also offers institutional investors the clarity they require. With the lawsuit hanging over XRP, it would have been hard for many institutions to invest in the coin.

Since the July 2023 ruling, XRP has experienced a remarkable surge, adding nearly $180 billion to its market capitalization. 

Here’s the biggest win of all for XRP: It now has a unique position of regulatory clarity in one of the world’s largest financial markets. This is something that will be hard for others to easily replicate in their current decentralized format.

It could be the sustainable moat that strengthens XRP through each passing regulatory challenge, government regime change and SEC leadership change faced by other cryptocurrencies.

With this US regulatory clarity, Ripple can now focus on global expansion without the weight of SEC litigation. This could lead to accelerated partnerships across Asia, Europe and other emerging markets where regulatory frameworks are still evolving and remain in a gray area.

The removal of legal distractions also gives a boost to Ripple’s introduction of its RLUSD stablecoin and the growth of the XRP Ledger’s capabilities.

Overall, this legal victory provides Ripple with incredible stability, affording it the unique strength to drive long-term technological development and ecosystem growth.