The U.S. Securities and Exchange Commission (SEC) has notified Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen of an impending lawsuit, alleging that the company's sales of the XRP token violated federal securities laws. The news triggered a sharp sell-off, with XRP plunging approximately 15% in early trading Tuesday, wiping out billions in market value.
SEC Legal Action: XRP Labeled as Unregistered Security
Ripple confirmed it received a Wells notice from the SEC on Monday, claiming that the company had been selling XRP as an unregistered security since its creation in 2013. This marks one of the most aggressive enforcement actions against a major cryptocurrency project, directly challenging the legal status of XRP, the third-largest digital asset at the time. SEC Chairman Jay Clayton, who is set to step down at year-end, reportedly voted to bring the case in his final days, drawing criticism from the crypto community as a last-minute attack on innovation.
Garlinghouse Fires Back: 'XRP Is a Currency, Not a Security'
Brad Garlinghouse responded forcefully on social media, stating: “Today the SEC voted to attack crypto. Chairman Clayton – in his final act – is picking winners and trying to limit US innovation in crypto to BTC and ETH.” He insisted that XRP is fundamentally different from securities: “XRP is a currency. The Department of Justice and Treasury’s FinCEN already determined XRP is a virtual currency in 2015, and other G20 regulators have done the same. No other country has classified XRP as a security.”
The CEO questioned the SEC’s timing, noting that the agency “permitted XRP to function as a currency for over eight years” and is now suing “just days before the change in administration.” He concluded: “Make no mistake, we are ready to fight and win – this battle is just beginning.”
Global Regulatory Alignment: Japan Confirms Non-Security Status
Ripple’s long-time partner SBI Holdings, a Japanese financial giant, expressed strong support. President Yoshitaka Kitao stated: “In Japan, the Financial Services Agency (FSA) has already made it clear that XRP is not a security. I am optimistic that Ripple will prevail in the final ruling in the US.” This highlights the divergence between the SEC’s stance and the views of other G20 regulators, as well as other U.S. government agencies. Garlinghouse argued that the SEC “is out of step with other G20 countries and the rest of the US government,” calling the lawsuit “fundamentally wrong as a matter of law and fact.”
Ripple May Move Headquarters Abroad
The hostile regulatory environment in the U.S. has already prompted Ripple to explore relocating its headquarters to more crypto-friendly jurisdictions such as London, Switzerland, Singapore, Japan, or the United Arab Emirates. Garlinghouse has previously criticized the lack of clear crypto rules in America, and the SEC’s lawsuit could serve as the final catalyst for a corporate exit. Market analysts warn that a U.S. win could set a precedent for classifying other digital tokens as securities, while a Ripple victory might accelerate the push for comprehensive federal crypto legislation. The case is expected to be filed in federal court within days, setting the stage for a landmark legal battle that could shape the future of crypto regulation in the United States.