Ripple Labs spent $ 690,000 lobbying in the US in 2020, but it still failed to save the company from a lawsuit from the Securities and Exchange Commission (SEC).
According to lobbying disclosures, Ripple’s lobbying program has outpaced other companies in the crypto sector in 2020.
In the meantime cryptocurrency exchanges like Binance.US, Gemini and Kraken did not report any spending for this. One of the largest exchanges in the world with more than 13.3 million users, Coinbase, spent 230,000 lobbying during the same period.
In early 2020, Ripple halted its internal lobbying team to shift contracts to professional law firms. The activities that Ripple sponsors are mainly aimed at laws before Congress such as the Token Taxonomy Act and the Digital Commodity Exchange Act.
This approach is quite similar to big techs such as Uber and Grab. These ride-hailing platforms work on the motto of moving forward to gain market share, addressing the latter rule by lobbying. If waiting for the legislation to be fully comprehensive, it is too late to compete or too expensive to regain market share. Especially the gray area with indistinctive laws.
Even so, Ripple is not avoiding the scrutiny of the U.S. Securities and Exchange Commission (SEC). On December 22, 2020, SEC filed a complaint against Ripple Labs, Inc. and two of its executives, Brad Garlinghouse and Chris Larsen, in the U.S. Southern District Court of New York. SEC accused Ripple Labs, the company that operates the cryptocurrency XRP, of violating regulations on digital assets.
In its complaint, the Commission pointed to a simple XRP sale model that has never been registered with the SEC or under any registration waiver. From the Commission’s point of view, this resulted in a continuing sustained activity of illegal sales of unregistered, non-exempt securities under Section 5 of the Securities Act of 1933.
Now, after 7 years since XRP and Ripple Labs were created, the SEC argues that individuals accused in the lawsuit as well as Ripple Labs have received many warnings not to follow the route they took but ignore it.
The SEC has taken action against many ICO projects over the past few years but Ripple is the biggest case ever. After the SEC filed a lawsuit against Ripple over the sale of tokens as unregistered security worth $ 1.3 billion, many major exchanges started deleting XRP and this trend is likely to continue. However, regardless of how this case is resolved in court, it would do very significant harm to the company and its XRP token price.
Ripple has always been in a state of controversy within the industry. As one of the oldest projects, it has captured the intention of many retail investors very early on. Through the benefits of that retail sale, the project once held third place by market capitalization on CoinMarketCap. But many cryptocurrency analysts are doubting its future for a long time.
One side is Ripple Labs, which is a growing enterprise and a large number of institutional clients. On the other hand, the XRP token has little to do with what that company is doing. Related to the Biden’s Administration announced January 17, 2021, the intention to nominate Gary Gensler as the chairman of SEC Ripple may have a bit of an edge, given its CEO backing for Joe Biden’s campaign, however, the risk is still very high.