Ripple settling its lawsuit with the U.S. Securities and Exchange Commission (SEC) could lead to an XRP supply shock, which presumably would lead to a price surge as demand would remain the same, while supply plunged.

As first reported by Daily Hodl, in a new video cryptocurrency legal expert and XRP supporter Jeremy Hogan has revealed he believes that Ripple’s legal battle with the SEC could have a positive outcome for the price of XRP.

In the video, Hogan revealed a settlement agreement would likely see Ripple pay a penalty to the regulator, and would likely “not include disgorgement of profits to purchasers because of the impossibility of figuring out how to disperse the funds.” A settlement agreement could also contain terms limiting Ripple’s sales of XRP released from escrow.

The agreement could effectively limit Ripple’s XRP sales to private companies and clients as well, drastically reducing the supply of XRP tokens on the market. He said:

This would in effect limit or slow the flow of XRP into the marketplace. Sales to section D or corporate purchasers cannot then be put into a public exchange for six months, maybe up to a year. A settlement containing this term would essentially bottleneck the flow of XRP into the market for years to come.

The legal expert continued, saying that Ripple could become the first cryptocurrency to be “100% in the clear from the SEC” if it were to reach a settlement with the regulator. As reported, the SEC’s lawsuit against Ripple and two of its executives alleges they “raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.” 

It negatively impacted the price of XRP, as after the lawsuit was announced most cryptocurrency exchanges started delisting the token to avoid any repercussions, affecting its liquidity. Some exchanges, however, sided with Ripple on the lawsuit, arguing that the SEC’s move hurt XRP investors.

 Crypto exchange Uphold pointed out that the SEC’s goal is to protect consumers, and believes it’s hard to see “how a judgment rendering XRP essentially worthless and inflicting billions of dollars of losses on retail investors” would square with that goal.

Ripple itself has argued the lawsuit “already affected countless innocent XRP retail holders with no connection to Ripple.” It added it “muddied the waters for exchanges, market makers, and traders.” The firm’s CEO Brad Garlinghouse has said the fintech firm is highly likely to go public after it settles its lawsuit with the regulator.

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.

Featured image via Pixabay