When the U.S. Securities and Exchange Commission sued Ripple in 2020, the company came closer to disappearing than most people realized. Brad Garlinghouse, Ripple’s CEO, has now revealed just how serious that moment was — and the choice he and co-founder Chris Larsen faced was starker than any courtroom drama: wind the company down, or bet everything on a legal fight against a government with, in Garlinghouse’s own words, “infinite power and resources.”
Summary
Key takeaways
- The Ripple SEC lawsuit began in 2020 when the agency alleged XRP was sold as an unregistered security, naming Garlinghouse and Larsen personally.
- Garlinghouse and Larsen seriously considered shutting Ripple down and distributing its XRP holdings to shareholders on a pro rata basis.
- Ripple chose to fight instead, a decision Garlinghouse says preserved hundreds of jobs and ultimately cost the company approximately $150 million in legal fees over four years.
- Judge Analisa Torres ultimately ruled that XRP itself is not a security, and the case was settled after a change in SEC leadership.
- Garlinghouse said he met SEC officials four times between 2017 and 2019 without a lawyer and was never told XRP might be treated as a security.
The Lawsuit That Almost Ended Ripple
The SEC’s case against Ripple alleged the company had sold XRP as an unregistered security — and it named Garlinghouse and Larsen personally, not just the company. That combination made the threat feel existential almost immediately.
Speaking at the University of Kansas School of Business earlier this week, Garlinghouse described the internal deliberations with unusual candor. He and Larsen had a real option on the table: distribute Ripple’s large XRP holdings to shareholders on a pro rata basis, dissolve the company, and effectively end the case by ending the defendant. The SEC’s complaint would have had nowhere to go.
It was, by Garlinghouse’s account, the easier path. Walking away would have spared the leadership team years of litigation and tens of millions in legal exposure. The problem was everything it would have left behind.
The Calculation Behind Choosing to Fight
Ripple’s decision to contest the Ripple SEC lawsuit came down to a workforce, not a legal theory. Shutting down would have cost hundreds of jobs, and that reality shifted the calculus.
“I’m glad in retrospect, but that was not obvious at the time,” Garlinghouse said. That line carries more weight than it might seem. At the moment the decision was made, there was no guarantee a court would agree that XRP wasn’t a security. There was no friendly SEC leadership waiting in the wings. There was just a company betting its survival on a legal argument that had never been fully tested.
The cost of that bet was steep. Garlinghouse put Ripple’s legal fees at roughly $150 million over four years — a figure that underscores just how resource-intensive it is for a crypto company to take on a federal regulator at full scale.
What Garlinghouse Said About the SEC’s Conduct
One of the more pointed parts of Garlinghouse’s account involved his pre-lawsuit interactions with the agency. He said he met with SEC officials four times between 2017 and 2019 — without a lawyer present — and was never told that XRP could be considered a security. That history shaped his view that Ripple had been denied the regulatory clarity it needed to operate properly, and that the lawsuit represented a failure of process as much as a legal dispute.
How the Case Actually Ended
The legal fight ultimately vindicated Ripple’s decision. Judge Analisa Torres ruled that XRP in itself is not a security — a landmark outcome for the broader crypto industry that drew a meaningful line between token sales and traditional securities offerings.
The case was then settled last year, following a shift in SEC leadership under the Trump administration toward a more accommodating posture on crypto. The combination of a favorable court ruling and a changed regulatory environment closed a chapter that had hung over the XRP ecosystem for years.
The strategic implication here is significant. Ripple’s willingness to absorb $150 million in legal costs and years of uncertainty ultimately produced a precedent that no settlement would have generated. A quiet dissolution or a negotiated exit would have left the legal question of XRP’s status unresolved — potentially affecting every other token project facing similar scrutiny. By fighting, Ripple created an outcome with industry-wide consequences.
Whether other crypto companies facing regulatory pressure will draw lessons from that calculus — and whether those lessons favor litigation or accommodation — may shape how the next wave of SEC enforcement cases unfolds.
FAQ
Why did Ripple consider shutting down after the SEC lawsuit?
Ripple CEO Brad Garlinghouse described shutting down as the easier path after the SEC sued in 2020, given that the agency had what he called “infinite power and resources.” Dissolving the company and distributing its XRP holdings to shareholders would have effectively ended the case by eliminating the defendant.
What alternative strategy did Ripple consider to resolve the SEC lawsuit?
Ripple considered distributing its XRP holdings to shareholders on a pro rata basis and informing the SEC it no longer held XRP, which would have ended the legal issue without going to court.
Why did Ripple decide to fight the SEC lawsuit instead of shutting down?
Garlinghouse said Ripple chose to keep fighting to avoid the loss of hundreds of jobs. The company ultimately spent approximately $150 million in legal fees over four years before prevailing when a federal judge ruled XRP itself is not a security.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
