On August 7, the U.S. Securities and Exchange Commission (SEC) fined Ripple $125 million in the ongoing lawsuit concerning institutional sales of XRP, alleging violations of securities laws. This development has raised questions about the future of Ripple’s on-demand liquidity (ODL) sales, which utilize XRP for instantaneous cross-border settlements.
ODL Sales and SEC Jurisdiction
Attorney Jeremy Hogan clarified that Ripple’s ODL sales, which are primarily conducted outside U.S. jurisdictions, are not subject to the SEC’s ruling. According to Hogan, these ODL transactions should not pose significant legal issues moving forward. He emphasized that Ripple can continue these sales with certain precautions, noting that five primary exemptions would facilitate this process when selling to businesses.
Legal Adjustments and Compliance
Hogan pointed out that the judge did not specify language regarding ODL in the court order. This omission means that if the SEC believes Ripple violated the court order, it can file for another contempt motion and provide evidence. This process would allow Ripple to argue that there should be no profit exemptions if XRP’s use is brief during ODL transactions.
Ripple’s legal team has had access to the summary judgment for over a year, suggesting that the company has likely adjusted its XRP sales practices to ensure compliance. However, whether Ripple has “gotten too close to the line,” as the judge suggested, remains to be determined if a contempt hearing occurs.
Expert Opinions
XRP lawyer Bill Morgan praised Hogan’s analysis, highlighting the constraints on ODL sales due to the need for exemptions or registration. Morgan argued that these limitations hinder the potential for low-cost, near-instantaneous global transactions that the technology enables. He questioned the necessity of national regulatory interference in such a globally beneficial technology.
Market Reaction
Following the SEC’s announcement, the XRP community celebrated the lower-than-expected penalty. The actual fine was significantly less than the $2 billion initially demanded by the SEC. In response, XRP’s price surged by 20%, surpassing $0.60. This positive market reaction has led analysts to speculate about the potential for an XRP ETF in the future.