Ripple Labs has been hit with another lawsuit, with the plaintiff claiming that it has operated as a security and therefore acted illegally. If the courts find in favour of the plaintiff, it could mean that they would face substantial fines and only those exchanges that are registered with the SEC would be able to offer XRP trading. Coinbase is attempting to secure SEC licensing, but has not yet managed it, so this could have a hugely detrimental effect on the cryptocurrency, hence why the company fervently argues its corner.
XRP As A Security
The current lawsuit alleges that the way in which Ripple Labs and the money service unit of Ripple, XRP II LLC, have run Ripple as a security. Specifically, the plaintiff claims that XRP is too closely managed and distributed by Ripple Labs, so does not quality as being decentralized. David Oconer has also said that the organisation has actively promoted the cryptocurrency in a bid to inflate prices, which is further evidence that it is being managed as a security.
In May 2017, Ripple said that they would be placing 55 billion XRP in an escrow account. Oconer claims that the company, including CEO Brad Garlinghouse, promoted this move because they believed it would inflate prices. Oconer said that limiting supply had the desired effect of increasing its prices. XRP rapidly increased in price from just over 20 cents a token to nearly $4.
This isn’t the first case of this kind faced by Ripple. On two previous occasions the company has been accused of managing XRP as a security. The most recent lawsuit was only filed last month, and it seems likely that whatever the result of these cases, Ripple will continue to be dogged by claims that XRP is a security. Ripple certainly has its detractors, but there are those that believe it could bridge the gap between cryptocurrency and fiat currency, and while it might not become the single currency that Garlinghouse wants it to be, it could pave the way for others in the future.
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