Ripple has warned that the U.S. Securities and Exchange Commission (SEC) is set to file a lawsuit against the company over the alleged sale of unlicensed securities, in this case, the third-largest cryptocurrency by market cap XRP.
Fortune reports Ripple CEO Brad Garlinghouse and cofounder Chris Larsen are set to be named as defendants in the lawsuit, which will be filed “in the near future.” If the SEC does sue Ripple, it will come after years of debate on whether XRP is a security that has to be registered with the agency or not.
According to the Wall Street Journal, the “lawsuit revolves around whether XRP, a digital asset that the company launched in 2012, is actually a security that should have been registered with the SEC.” The lawsuit will name Ripple CEO Brad Garlinghouse and cofounder Chris Larsen as defendants, Garlinghouse said.
On social media, Garlinghouse said that the SEC “voted to attack crypto” and is “trying to limit US innovation in the crypto industry to BTC and ETH” while commenting the potential lawsuit. Speaking to Fortune, he said the SEC’s decision to sue right before the holidays is “not just Grinch-worthy, it’s shocking,”
The SEC has in the past made it clear cryptocurrencies like bitcoin and ether are not securities because of their decentralized nature and the mining process through which new coins are added to the market. A total of 100 billion XRP were minted without a mining process, however, and Ripple holds the majority of the funds in reserve and sells them in scheduled allotments.
Ripple itself has pushed back on the notion that XRP is a security, pointing out it cannot tap into the reserves as it wishes, and that XRP’s decentralization has been gradually growing as banks and other institutions use the token for cross-border transactions.
To Garlinghouse, The SEC saying XRP is a security controlled by Ripple is akin to viewing oil as a security controlled by Exxon, Fortune reports. The CEO of Ripple also criticized the agency’s chairman, Jay Clayton, for deciding to sue before departing as part of the presidential transition.
Per the CEO “he has decided to sue Ripple, and leave the legal work to the next chairman.” The potential lawsuit comes months after Ripple executives suggested the firm could relocate its headquarters to outside of the United States.
Featured image via Pixabay.