The cryptocurrency space was hit with a bombshell on December 21st when news broke that the SEC would be suing Ripple, the company behind XRP. The next day, the SEC officially announced their lawsuit against not just Ripple, but also Ripple CEO Brad Garlinghouse, and Ripple co-founder Chris Larsen.
This has put the price of XRP in a freefall as many investment firms, exchanges, and partners have begun to distance themselves from Ripple and its native cryptocurrency. To the average onlooker it may not be entirely clear why this is happening, nor why this lawsuit may have implications on the entire cryptocurrency space. We are here to give you the TLDR.
Why is the Ripple lawsuit important? The Ripple lawsuit is important because if the SEC wins their case, XRP will be treated as a security and not a currency in the United States. This will broaden the definition of the Howey test, setting a legal precedent that could result in other similar cryptocurrencies also being classified as securities.
Most of you have probably read some version of this explanation in various news articles already. As you can imagine, it does not really provide any clarification to anyone unfamiliar with this sort of jargon. However, there is no getting around these terms. Knowing what they are is both necessary to understand this case and any others that may arise as the bull market draws attention to crypto.
đź“° BREAKING NEWS!
Kraken reaches $30M settlement with SEC over staking as IRS seeks user information “Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all,” said Gurbir Grewal.
Cryptocurrency exchange Kraken has reached an agreement with the United States Securities and Exchange Commission to stop offering staking services or programs to U.S. clients.
In a Feb. 9 announcement, the SEC said it had charged Kraken with “failing to register the offer and sale of their crypto asset staking-as-a-service program,” which the commission claims qualified as securities under its purview. The crypto firm has agreed to cease operations of its staking program for U.S. customers as well as pay $30 million in disgorgement, prejudgment interest and civil penalties.
“Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all,” said the SEC’s Division of Enforcement director, Gurbir Grewal. “All the while, it provided them zero insight into, among other things, its financial condition and whether it even had the means of paying the marketed returns in the first place.”
