Ripple, the company responsible for the popular cryptocurrency XRP, finds itself facing potential fines amounting to $1 billion as a result of its legal battle with the Securities and Exchange Commission (SEC). The recent developments have sparked a series of questions surrounding Ripple’s ability to cover such a substantial sum and the potential impact on its operations.
What’s The Fine Dilemma?
In a series of thought-provoking tweets, Charles Gasparino, a reporter from Fox Business, has highlighted a crucial aspect of whether Ripple would use its available $1 billion cash reserves or opt to dilute its holdings of XRP to address the looming fine. The company’s decision will carry significant implications for its future financial stability.
While analyzing this, Gasparino draws attention to the accuracy of analyst John E Deaton’s predictions about the trial’s outcome. Initially, the court ruled that the initial sales of XRP were illegal, as they violated the Howey Test—a legal principle used to determine if a transaction qualifies as an “investment contract.” However, the court found that secondary market purchases of XRP did not breach the law. Consequently, Ripple CEO Brad Garlinghouse may be held personally responsible for paying the fine.
But the question is how will they tackle this colossal financial blow?
Despite the fact they secured a partial victory, it didn’t change Gasparino’s skepticism regarding Ripple’s prospects during the appeal process. He further emphasizes that Ripple will still have to face penalties for the portion of the case they lost. But the overall uncertainty behind Ripple’s legal situation is further exemplified by the sharp drop in XRP’s price following the initial market rally upon the verdict announcement.
Potential Reversal?
In addition to Gasparino’s comments, legal analyst John Reed Stark also criticizes the court’s decision, citing potential flaws and a complex differentiation between private and programmatic sales of XRP. Notably, Stark raises concerns about the emergence of a new class of “quasi-securities” that fluctuate depending on the investor’s level of sophistication. He argues that this concept is unprecedented and inconsistent with established SEC case law.
However, Stark is confident that the rulings pertaining to programmatic and other sales will likely be overturned.
It’s important to note that XRP’s value has shown a moderate increase after the court verdict. Interestingly, the gains of roughly 90% in 24 hours sent the cryptocurrency to a new all-time high, surpassing $0.93 by a wide margin. While the pace shows that the XRP price may continue its bull run above $1, only if there is no potential barrier on the path.
The Ripple case is far from concluded, as the SEC is expected to appeal the decision. Industry observers, such as Stark, anticipate a reversal of the rulings regarding programmatic and other sales. The future of Ripple, its legal standing, and the broader implications for the cryptocurrency market remain uncertain as this high-stakes legal battle continues to unfold.
