US SEC sues Ripple over XRP, CEO insists XRP is not a security

CEO calls SEC's actions an attack on cryptocurrencies

The U.S. Securities and Exchange Commission (SEC) is reportedly preparing to file a lawsuit against Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen over the sale of the XRP cryptocurrency. Ripple said it received a notice from the regulator on Monday alleging that it violated laws on the sale of unregistered securities when it sold XRP to investors. The news caused XRP's price to fall sharply, down about 15% early Tuesday.

The lawsuit is expected to be filed in the coming days, Garlinghouse tweeted Monday:

“Today, the SEC voted to attack cryptocurrencies. Chairman Jay Clayton — in his final act — is picking winners and trying to limit U.S. innovation in crypto to just BTC and ETH.”

Garlinghouse has maintained that XRP, like Bitcoin, is not a security, calling the SEC’s lawsuit “fundamentally wrong as a matter of law and fact.” SEC Chairman Jay Clayton is set to step down at the end of the year.

Ripple insists XRP is not a security, questions timing of lawsuit

Garlinghouse believes that "XRP is a currency and does not have to be registered as an investment contract." He pointed out that "the Department of Justice and the Treasury's FinCEN have determined that XRP is a virtual currency in 2015, and other G20 regulators have done the same. No other country has classified XRP as a security."

Yoshitaka Kitao, president of Ripple partner SBI Holdings, noted that in Japan, the Financial Services Agency (FSA) “has clearly stated that XRP is not a security,” adding that he is “optimistic that Ripple will prevail in the final ruling in the U.S.”

Asserting that the SEC is “out of touch with the rest of the G20 & the rest of the U.S. government” and that the agency “should not be cherry-picking innovation,” Garlinghouse declared:

“Ripple has and will continue to use XRP… Make no mistake, we are ready to fight and win — the battle has only just begun.”

The CEO questioned the SEC's motives and the timing of the lawsuit. "The SEC has allowed XRP to operate as a currency for over 8 years, and we question the motivation for filing this lawsuit just days before a change of administration," he began. "Instead of providing a clear regulatory framework for crypto in the United States, (SEC Chairman) Jay Clayton inexplicably decided to sue Ripple — leaving the actual legal work to the next administration."

U.S. crypto regulations have already led Ripple to consider moving its headquarters to a more crypto-friendly jurisdiction such as London, Switzerland, Singapore, Japan, or the United Arab Emirates.