No Matter What Happens With the SEC, Ripple Has Already Won

Ripple (XRP) has long served as a punching bag for jaded crypto folk. Until Gary Gensler.

Gensler is the Cruella de Vil to crypto’s 101 market caps.

The SEC has come for Kraken, Genesis and Gemini, although it was very late to the latter two. Gensler has prosecuted LBRY and sued degenerate-in-chief Justin Sun over his TRX and bittorrent offerings just last month. Now, he’s even angling for the biggest fish — Coinbase — posturing to sue the top US crypto exchange for trading in (alleged) unregistered securities.

But while the SEC has dished out more than 80 enforcement actions against crypto startups since 2017 — 30 of them last year — there is one case that trumps almost all others. The SEC vs. Ripple. 

Although many crypto industry observers previously saw Ripple as the butt of the joke, the SEC case (win or lose) is sparking what appears to be a 180 degree change in how crypto diehards view the long-derided company.

Gensler is adamant there’s no need for crypto-specific securities laws. And among those 80 or so cases against crypto startups are instances of outright fraud and other misdealings. Those efforts must be applauded. 

But in the background all along, from before Gensler’s time, Ripple has been funding a full-scale legal defense against the US securities regulator. It has also publicly refused to settle, bucking the trend of crypto startups ponying up to SEC fines.

Critics would have once said that XRP is centralized, entirely premined with Ripple Labs awarding itself 80% of the supply from the get go. Others would take offense on a more philosophical level: XRP is the banker’s crypto, built to strengthen the existing finance system that Bitcoin was so immaculately conceived to undermine. 

But today, if crypto insiders were looking through their enemies’ enemies for new friends, Ripple and Garlinghouse are top of the pile.

A badge of honor

Ripple Labs executives have never exactly tried to mend the divide between Ripple and the rest of the crypto world.

Co-founder Chris Larsen’s $5 million “Change the Code, not the Climate” campaign, launched alongside Greenpeace last year, aims to convince Bitcoin to ditch proof-of-work mining with newspaper ads and whatnot. 

But the stunt has amounted to more annoyance than any real clout. Bitcoiners even ironically adopted the campaign’s apocalyptic mascot.

Despite the ongoing SEC strife, Ripple also claims its business is better than ever. Institutions do seem increasingly eager to use its crypto-powered payment rails: Ripple now discloses billions in quarterly revenue from selling XRP over the counter for use on RippleNet, spending a near-equal amount to rebuy the token on public markets.

Not that it really matters. XRP has persistently been one of the most valuable blockchain projects in the world. There’s a certain Lindy effect that comes with nearly a decade of staying power in crypto.

All this we know. The interesting part isn’t that Ripple is considered to a success in spite of its detractors — it’s interesting now who considers Ripple a success. It took crypto’s no. 1 villain, Gary Gensler, to fully legitimize the project in the eyes of the formerly-dubious crypto crowd.

It used to be that crypto startups were cursed if their tokens were labeled securities — something must be wrong with the project if even the SEC knows it’s centralized. 

But now, the agency’s fixation on interest-bearing crypto accounts — Coinbase’s proposed lending product and Kraken’s staking as a service offerings — has set the stage for Ripple’s redemption arc. 

It seems realistic that the SEC case could cripple Ripple outright. But the case may well have secured Ripple’s reputation for good. 

If Ripple wins, it will have defeated Goliath, to be crowned a crypto champion. Ripple’s reputation would only be steelmanned if it lost. A monumental fine could hypothetically bankrupt the firm, but considering its current revenues, it’s unlikely. 

It could be that nothing really changes for Ripple after the case concludes — win, lose or jury trial. 

Except, one major shift: The magnetic poles of the crypto industry have flipped. XRP is now bona fide in the eyes of a once-hostile industry. 

All thanks to the SEC.

Updated Apr. 7, 2023 at 11:40 am ET: Corrected which Ripple executive launched the “Change the Code, not the Climate” campaign.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.