Five years, $125 million and a decision that would revolutionize the way crypto is regulated in America. The complete story is here.

The SEC sued Ripple Labs in December 2020, alleging that the company raised $1.3 billion from the sale of unregistered securities, namely the XRP token. The case lasted for almost five year. In that period, XRP has been delisted from dozens of exchanges, its price dropped and the entire crypto industry waited with bated breath to observe the development, which would affect the fate of all other tokens.

It was ended in August 2025. The end was also more complicated — but more interesting — than most people had anticipated.

How Ripple started — and why it was always controversial
Established in 2012 by Chris Larsen and Jed McCaleb with an objective to create a faster and less expensive way to make international bank transactions. The XRP Ledger started with 100 billion tokens pre-minted from the outset. No mining, no incremental issuance, just 100 billion coins distributed on day one, most of which are still in Ripple's hands.

That's the one thing that did not let the rest of things get away. Ripple kept most of the supply in its treasury to fund its operations and adoption efforts. It sold XRP to institutions to finance the company. This is not the Bitcoin way of doing things. There's no company behind bitcoin that profits by selling coins to bring in money. Ripple did. And the SEC contended that the structure — the company sells the tokens to raise funds, and the purchasers hope to profit from the company's success — is the structure that securities law was meant to address.

The irony is, Ripple had been treated as a currency for regulatory purposes years ago. It in 2015 resolved with FinCEN and the Department of Justice concerning violations of the Bank Secrecy Act, including its registration as a money services business and strengthening anti-money laundering controls. That settlement essentially deemed XRP to be money instead of a security. The SEC's 2020 lawsuit had the opposite view. It took five years for the litigation to ensue.

The lawsuit was what the SEC actually said
The SEC's stance was simple: Ripple raised a whopping $1.3 billion by selling XRP to investors who are counting on Ripple to create the network and promote adoption in the hopes of getting rich from it. That’s what constitutes a “security” under the “Howey Test” legal definition – the four-factor test for determining whether an item constitutes an investment contract. SEC sought $2 billion in fines and an injunction prohibiting Ripple from selling XRP in America.

The impact was swift. Coinbase, Kraken, Bitstamp and many other exchanges pulled XRP from their exchanges because of regulatory exposure. Over the past few weeks, the price fell more than 60% from the time of the lawsuit. Retail investors who did not participate in any institutional selling were not able to sell the asset on their platforms.

Ripple's defense was based on the principle that XRP wasn't a security, it was a currency that's used for payments. A trade between two users on Coinbase is not an investment in Ripple's business, it's a trade in a liquid secondary market of a digital asset that has no connection to the business. That argument proved to be more legally significant than most could have foreseen.

The decision that made everything different — July 2023
Judge Analisa Torres issued her summary judgment ruling in July 2023 which resulted in a split – a surprising result for almost everyone. Her move split the history of XRP in half.

On one side: Ripple's direct institutional sales of XRP – to hedge funds, banks and large investors – were investment contracts and thus unregistered securities. Ripple was wrong on this one. These were sophisticated buyers, direct connections, and there was an expectation of profit associated with Ripple's efforts.

On the other side: XRP was not a security when it was sold on public exchanges in secondary markets. At the time of purchasing XRP at Coinbase, you were not aware whether the seller was the Ripple or some other trader. You were not directly involved in the company's investment activities. The Howey Test's requirement of a "reasonable expectation of profits from the efforts of others" was not met because the buyer could not reasonably have expected to realize profits from someone else's efforts.

The distinction, which was later dubbed the "Torres Doctrine," became the greatest legal basis to regulate crypto in the United States. It made it clear that the same token can be a security in one application, but not in another, depending on the terms and conditions of its sale. XRP was immediately re-listed on the institutions. The price surged.

The Torres Doctrine is already being implemented outside of XRP. The institutional-vs-retail split is now being applied to the tokens of Solana, Cardano, and others under similar examination by courts and regulators. One case created a structure that all industry is now moving through. Consequential was the Ripple ruling.

The settlement — August 2025
Following the verdict of 2023, both sides appealed. The SEC attacked the programmatic sales ruling, the one that Ripple took. Ripple contested the institutional sales ruling, which it lost, and the size of the fine.

In early 2025, new SEC Chair Paul Atkins took over. His philosophy on crypto was quite different from his predecessor Gary Gensler's. Gensler had been a hard-line enforcer in the industry, while Atkins was indicating a shift towards more transparent rulemaking. The Ripple case was high on the new leadership's list of cases they wanted to be resolved. In early 2025, the SEC withdrew its appeal.

The settlement table was in Ripple's favor following the SEC's appeal being dismissed. Both sides officially dropped their last appeal in August of 2025. The settlement cost ripple $50 million — a significant cut from the $125 million the court ordered, and less than the SEC's initial $2 billion request. Executives CEO Brad Garlinghouse and co-founder Chris Larsen were relieved of their personal fiscal responsibility. The case closed. The trading of XRP in retail markets has been classified as non-security. Ripple moved $75 million in previously set aside money for possible penalties into its US and international expansion.

What Ripple is currently working on.
As a result of the lawsuit, Ripple has acted quickly. The company introduced a new stablecoin called RLUSD in December 2024, which is pegged to USD. It now holds a market cap of around $1.6B and by Nov. 2025 reached more than $1B. The key point to note here is that while RLUSD can be used for stable value settlement, XRP is a bridge asset and a liquidity asset that facilitates cross-border transactions. They are designed to be used together to make RippleNet -- the payment system of more than 300 financial institutions -- more competitive against SWIFT for international settlements.

Ripple also has a conditional national trust bank charter, which will enable Ripple to become an official digital asset custodian. Not something to be taken lightly. It implies that Ripple will be able to store assets on the behalf of its clients under the supervision of the U.S. banking systems — a feature that most crypto businesses are not equipped with and that paves the way for institutional partnerships that were previously unthinkable.

Seven XRP ETFs opened their doors in November 2025 to early 2026 with more than $1.29 billion in net inflows. The bank expects institutional demand to remain at current levels and to generate $4–8.4 billion in first-year flows. To put this in perspective, $34 billion was invested in Bitcoin spot ETFs in 2025. The number of institutions participating in XRP is significantly smaller, but the trend is certainly a positive one.

The honest risks
Business success does not equal legal clarity. The payment network ripple competes with SWIFT, which is still updating its own payment network infrastructure. There are at least 30 banks that are already connected to SWIFT, but most of them are only integrated for messaging purposes with RippleNet, which doesn't mean that XRP will necessarily serve as a bridge asset. The messaging layer is not required to be used for settlement by any banks. Many don't.

The competition of stablecoins is genuine and increasing. As a cross-border payment asset, USDC, USDT and Ripple's own RLUSD can all be used. Ripple, the company, continues to thrive as banks seek to park in stable dollar-pegged assets as opposed to volatile XRP. It is possible to have both of those outcomes at the same time. There are a ton of different reasons why the business and the price-level of XRP can diverge.

The lawsuit settlement hasn't solved a price history riddled with volatility. XRP reached $3.66 at its July 2025 peak, then dropped over 55% to $1.16 in early 2026. The regulatory tail has been swept away. The market head wind – namely broader crypto weakness, Fed policy and global uncertainty – had nothing to do with the court ruling. Despite what a judge says, XRP remains a cryptocurrency and is therefore open to all the ups and downs that drive crypto markets.

The proposed, one vote away from passage, CLARITY Act would make XRP a digital commodity under federal law permanently. That is the most significant price driver that still remains for XRP, and that's taking away the final lingering regulatory uncertainty and paving the way for more significant institutional investments, analysts say. The White House has targeted July 4, 2026 for the signing. It's not clear if that deadline will be met. The trajectory of crypto regulation in the United States in 2026, however, is more certain than it has been in five years, and XRP is more likely to thrive in that climate than any other time since it was sued.