Ripple Is a Controversial Company with a SEC Lawsuit Looming Over It

Ripple is a private for-profit company based in San Francisco that has a tenuous relationship with the Ripple (CCC:XRP-USD) cryptocurrency. As I detailed in my last article on the crypto, the company was sued by the U.S. Securities and Exchange Commission (SEC) back in late December of last year.

A close-up shot of an XRP token with the logo and Ripple in raised text.
Source: Shutterstock

Of course, this leaves the future of XRP very much in doubt. That is, this is at least the case until these SEC allegations about the company are resolved, in some way or another.

So, here’s what you should know about Ripple as we move forward into the summer.

Ripple the Company Has Issues

There as been a lot of writing over the past few years about the origins of Ripple, as well as its relationship with the XRP token. However, one of the more interesting articles I’ve found pointed out that this cryptocurrency is not decentralized like Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and most other digital currencies.

Instead, XRP is largely controlled by Ripple the company. In fact, there is no mining or validation of the blockchain through a proof-of-work system like Bitcoin and Ethereum. Ripple distributed all of the XRP tokens to itself, its founders and its clients.

Another issue is that “XRP is not Ripple.” Ripple the company has several software products that it sells to banks. Only one of these actually involves XRP the cryptocurrency to help transfer money. Additionally, that product is not nearly as popular as Ripple’s other software products.

The article I’ve referenced here was written back in early 2018. Since then, XRP-USD has hit a high of nearly $2 and now trades at about 94 cents as of May 25. Granted, it also has a market capitalization of $42.7 billion.

However, the current circulating supply is 46.1 billion XRP-USD while the total supply is 99.9 billion. That leaves some room for growth in the supply of XRP, but will tend to produce a scarcity effect over time — sort of like what Bitcoin has. This is both good and bad.

On the one hand, a supply constraint could push XRP higher, assuming there is an overwhelming demand. On the other hand, though, XRP is ill-suited to be a medium of exchange.

Where This Leaves XRP-USD

Most alarming with this name, however, is that Ripple is moving on as a company as if there is no SEC lawsuit. Recently, it hired a former U.S. Treasurer to its board of directors. Rosie Rios used to work for former President Barack Obama’s administration. Additionally, Rios made a statement on the company and crypto: “Ripple is one of the best examples of how to use cryptocurrency in a substantive and legitimate role to facilitate payments globally.”

On top of this move, the company is also making other management hiring decisions. For example, Ripple hired Kristina Campbell — previously of PayNearMe and Green Dot — as CFO. This is despite the $1.3 billion SEC lawsuit against Ripple and two of its main executives.

That said, the company has apparently won some smaller legal issues against the SEC. It has also filed a motion to dismiss the lawsuit. This was after it won the right to see what the SEC has been writing internally about its main competitors, Bitcoin and Ethereum. The company is essentially arguing that it should be treated the same way as those cryptos.

So, maybe investors in XRP-USD should not worry so much about the SEC, especially if the lawsuit is thrown out. Don’t count on that, though. This is a typical move in legal scuffles.

All in all, you need to be extremely careful with Ripple. Like other cryptocurrencies, XRP-USD is currently well off its highs. In addition, this nasty legal fight with the government could go on for years. I’m willing to bet it will drag on XRP.

On the date of publication, Mark R. Hake held a long position in Bitcoin (BTC) and Ethereum (ETH). The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Mark Hake writes about personal finance on and runs the Total Yield Value Guide which you can review here.

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