XRP vs SEC, explained

What the SEC claimed

In December 2020 the SEC said Ripple Labs and executives Chris Larsen and Brad Garlinghouse raised over 1.3 billion dollars by selling XRP without registering it as a security. The key question was whether buying XRP was an investment contract under the Howey test, meaning people paid money expecting profits from Ripple's efforts.

Ripple's defense

Ripple argued XRP is a currency used for payments, that buyers on exchanges had no contract with Ripple, and that the SEC had never warned the industry. It also pointed out the SEC had treated bitcoin and ether as non securities.

The July 2023 ruling

Judge Analisa Torres split the difference. Sales directly to institutional buyers, about 728 million dollars, were unregistered securities offerings. Programmatic sales on exchanges, and sales to employees and developers, were not. XRP jumped on the news and exchanges relisted it.

How it ended

The SEC dropped its claims against Larsen and Garlinghouse in October 2023. In August 2024 the court ordered a civil penalty of about 125 million dollars, far below the roughly 2 billion dollars the SEC wanted. Both sides appealed, but after leadership changed at the SEC in 2025, the appeals were dropped in August 2025 and the penalty stood.

Why it matters

The case is the most detailed US court treatment of when a token sale is a securities offering. Its distinction between institutional and exchange sales is still debated, and other courts are not bound by it.