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SEC vs Ripple: Is Commission’s Legal Remedy Request Disproportionate? 

Published April 4, 2024 6:09 PM
Shraddha Sharma
Published April 4, 2024 6:09 PM

Key Takeaways

  • The SEC’s legal remedy request against Ripple is seen as disproportionate by the crypto community.
  • Legal experts note that the agency is aiming for 300% of unregistered sales instead of 11%.
  • Is this a case of SEC overreach and inconsistency?

The US Securities and Exchange Commission (SEC) has sought remedies against Ripple Labs, Inc. The action stems from allegations of unregistered securities offerings by Ripple. The demand has led to community accusations that allege the SEC’s disproportionate demands and inconsistencies in its regulatory approach.

SEC’s Legal Remedy Request

SEC’s Motion for Remedies notes  that Ripple violated the Securities Act of 1933 by its unregistered sales of XRP. The agency has proposed a final judgment that includes a sweeping set of injunctions, disgorgement with interest, and civil penalties. Specifically, the Commission seeks over $1.95b in combined fines and disgorgements, a figure that dwarfs the profits Ripple gained from the alleged violations.

The remedy package not only aims to penalize Ripple but also to permanently bar it from similar securities violations, essentially requiring all future offerings of XRP to be registered with the SEC.

Community Criticism Defending Ripple

The SEC’s aggressive stance has not gone unnoticed. Several XRP members have voiced concerns over what they perceive as an abuse of regulatory power.

Law professor J. W. Verret highlights a startling disparity in the SEC’s demands: while typically collecting around 11% of claims in similar cases, the Commission is targeting a 300% recovery from Ripple. He notes that it starkly contrasts with past actions against other entities, such as Telegram, Thor, Kraken, and Kik Interactive, suggesting a potential overreach.

Legal expert Bill Morgan accuses the SEC of fabricating its regulatory stance as circumstances dictate. Meanwhile, Coinbase’s Chief Legal Officer, Paul Grewal, also finds inconsistency in the SEC’s treatment of Bitcoin compared to other cryptocurrencies. He challenges the agency’s rationale behind the security status differentiation between tokens in a post on X.

Will the Judge Approve?

The SEC’s legal remedy request against Ripple has sparked a heated debate about regulatory enforcement and overreach. Several legal experts from the crypto community accuse the SEC of disproportionate demands and arbitrary standards.

The Ripple SEC case remains a focal point for the SEC’s approach to digital assets. With the SEC lawsuit set to unfold in April and May, it has to be seen how the judge responds to the remedy request motion.

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