From the day the Jay Clayton-chaired Securities and Exchange Commission (SEC) filed its lawsuit against Ripple in December 2020, the final outcome has been up for debate.
According to one side, commissioners would obviously prevail on the merits of SEC v. Ripple et al. In contrast, investors who appreciated the thousands of percentage point gains in XRP’s price since its Initial Coin Offering (ICO), found it hard to sympathize with the SEC’s attempt to protect investors from non-existent harm.
The lawsuit was born into controversy. Clayton resigned as chairman one day after commissioners jointly filed their SEC lawsuit, suspiciously stepping down from his term six months early. Without explaining itself, the SEC also dropped its personal charges against Ripple co-founders Chris Larsen and Brad Garlinghouse.
As litigation dragged on, certainty about any particular outcome faded. Ripple’s well-paid lawyers guided the suit through proceedings for years with no final decision.
Finally, on July 13, 2023, the US District Court for the Southern District of New York issued its final decision: Ripple would pay a manageable fine for some behaviors but didn’t break the law by selling XRP to most retail investors.
Reinvigorated, Ripple’s supporters interpreted that ruling by Judge Analisa Torres as clearing the most important category of XRP transactions from illegality. In their mind, that was the end of the years-long lawsuit.
However, the SEC has been pursuing an appeal of Torres’ ruling since October 2024. The US Court of Appeals for the Second Circuit now has that appellate determination in its hands.
Outcome #1: Affirmation
That appeal brings the reader to the first and most likely outcome of SEC v. Ripple et al.: that the Second Circuit will affirm Torres’ decision. Most US appellate courts affirm the rulings of the lower court. Moreover, Ripple is cross-appealing Torres’ decision, which grants even more probability that the appeal will affirm the ruling.
Statistically speaking, therefore, the most likely outcome of the lawsuit is that Torres’ ruling will be affirmed on appeal.
Read more: Ripple went all-in on politics and gained billions
Outcome #2: Settling the cross-appeals
The next most likely outcome is probably a settlement. With the resignation of ex-Chairman Gary Gensler and a brand new presidential administration, XRP supporters have good reason to hope for a politically influenced settlement.
Supporting this possibility is none other than Donald Trump himself, who posted a link to a CoinDesk article that described his administration’s positive effects on XRP and Ripple. Garlinghouse says Ripple has also done more hiring within the US since Trump won the election.
Since the SEC’s leadership has changed, it has already dropped, settled, and paused several cases against crypto businesses like Uniswap and Robinhood. This has led to speculation that it could drop or settle its Ripple lawsuit as well.
Outcome #3: Reversal of the trial court
Finally, the third most likely outcome is a reversal of Torres’ trial court decision. This would grant the SEC a definitive victory.
There are two controversial rulings that Torres made that angered the SEC: (1) that Ripple didn’t illegally sell XRP in programmatic sales to retail buyers, and (2) that Ripple didn’t illegally accept non-cash services and labor in exchange for XRP.
Obviously, the SEC would like the Second Circuit to overturn both of those determinations.
If the Second Circuit does overturn either of her rulings, that would be a third possibility for the ultimate outcome of this lawsuit.
