In December 2020, the United States Securities and Exchange Commission (SEC) filed a complaint against Ripple Labs Inc. and two of its executives, Brad Garlinghouse and Chris Larsen. The main accusation concerned the unregistered sale of securities estimated at around $1.3 billion through the cryptocurrency XRP since 2013 (source: SEC, official complaint, 12/22/2020).
The SEC considered XRP to be an "investment contract" under U.S. law, thus a security subject to regulation. Ripple contested this classification, arguing that XRP is a decentralized digital currency, comparable to Bitcoin or Ethereum, and not a security.
The lawsuit went through several preliminary procedural phases, notably regarding the production of internal documents and the admissibility of evidence. In 2021, several court decisions partially rejected the SEC's arguments, particularly on the clarity of applicable rules for cryptocurrencies (source: Bloomberg, 11/15/2021).
Partial Verdict 2023: Analysis and Implications
On July 13, 2023, Judge Analisa Torres of the U.S. District Court for the Southern District of New York issued a crucial partial verdict. She ruled that Ripple's sale of XRP to institutional investors constituted an unregistered securities offering, whereas sales on public platforms to retail users did not constitute a securities sale (source: U.S. District Court for the Southern District of New York, judgment, 07/13/2023).
This verdict thus created a novel legal distinction between different XRP distribution channels:
Sales Channel
Legal Status According to Verdict
Direct Institutional Sales
Unregistered Securities
Sales on Public Exchanges (Retail Users)
Not Considered Securities
Ripple announced its intention to appeal the unfavorable part, while the SEC also expressed dissatisfaction with the parts not upheld (source: Ripple press release, 07/14/2023).
Impact of the Lawsuit on XRP Price
Before the lawsuit announcement in December 2020, XRP traded around $0.30. Following the complaint, it dropped to as low as $0.17 in January 2021, due to the withdrawal of many major platforms (Coinbase, Binance US) suspending XRP (source: CoinMarketCap).
After the partial verdict in July 2023, XRP’s price rebounded from $0.40 to $0.55 within a month, reflecting a partial resurgence of confidence among institutional and retail investors. The average daily trading volume increased by 35% during this period (source: Bloomberg, August 2023).
However, volatility remains high, with a beta estimated at 2.1 relative to Bitcoin, indicating higher risk for investors (source: CryptoCompare, 2023).
XRP Ledger vs Ripple Network: Technical and Functional Differences
It is crucial to differentiate between the XRP Ledger (XRPL) and the company Ripple Labs:
XRP Ledger: a decentralized open-source ledger launched in 2012, using a unique consensus mechanism called the "Ripple Protocol Consensus Algorithm" (RPCA). It enables fast transactions (3-5 seconds) with very low fees (0.00001 XRP per transaction) (source: XRPL.org).
Ripple Labs: a private company developing solutions based on XRPL, notably for cross-border payments via its flagship product, On-Demand Liquidity (ODL).
The SEC lawsuit primarily targets Ripple Labs and its commercial use of XRP, but not the XRP Ledger itself, which remains an independent open-source protocol (source: Ripple Labs FAQ, 2023).
Institutional Adoption of Payments via Ripple and XRP
Despite legal uncertainties, Ripple has continued developing its solutions with financial institutions:
Over 400 financial institutions use RippleNet across 50 countries (source: Ripple, 2023 annual report).
More than 20 payment corridors utilize On-Demand Liquidity (ODL) for XRP transfers, notably between Mexico, the United States, and Japan.
Total payment volume via ODL reached $2.2 billion in 2023, up 45% compared to 2022 (source: Ripple, Q1 2024 investor presentation).
However, Ripple’s market share in cross-border payments remains small compared to traditional SWIFT systems or blockchain competitors like Stellar or JPM Coin.
Residual Risks and Regulatory Outlook
Several risks remain for French investors:
Regulatory Risk: the legal classification of XRP is not uniform globally. In France, the AMF considers crypto-assets as financial instruments under certain conditions, but XRP’s classification remains unclear (source: AMF, 2023 doctrine).
Judicial Risk: the SEC judgment appeal may prolong uncertainty for several years, potentially impacting liquidity and adoption.
Competitive Risk: Ripple faces well-funded competitors, especially in blockchain-based cross-border payment solutions.
Market Risk: XRP’s high volatility implies a high risk/return profile not suitable for all investors.
Conclusion and Recommendations for French Investors
The SEC vs Ripple lawsuit has clarified certain regulatory aspects, notably by distinguishing institutional sales from retail sales, but does not end legal uncertainty. Institutional adoption of XRP in cross-border payments is progressing but remains marginal compared to traditional systems.
Financially, XRP remains very volatile and exposed to persistent regulatory risks, limiting its appeal as a diversification asset in a cautious portfolio. Conversely, investors with a risk appetite and good sector understanding may consider limited exposure while closely monitoring judicial and regulatory developments.
Recommendation: prioritize diversification with a limited allocation (<5%) in XRP for dynamic portfolios, await final lawsuit resolution before considering increased exposure, and follow guidance from the AMF and the Banque de France on crypto-asset regulation.
