Don’t Go All in on XRP, But an SEC Lawsuit Win Would Be a Huge Catalyst

  • XRP has been moving higher with other cryptos based on encouraging geopolitical developments.
  • An immensely risky proposition, XRP may also receive firm legal clarity.
  • It’s worth looking into with a small position — think the loose change in your pocket.
A close-up shot of an XRP token with the logo and Ripple in raised text.

Source: Shutterstock

A cryptocurrency that’s never been short on attracting controversy, XRP (XRP-USD) for once was caught riding the coattails of another controversial event. Following Russia’s dangerous decision to invade neighboring Ukraine, the modern global order fell into disarray, unsettling all capital markets. Therefore, a possible resolution to this horrible headwind injected some much-needed optimism in the crypto space.

Personally, it’s prudent to not read too much into present geopolitical dynamics. Although no one wants to see the outbreak of violence in Eastern Europe continue, the fact that we’re in this situation in the first place bodes poorly for future stability.

In this brave new world, all bets are off. That’s not an entirely conducive environment for XRP or other cryptos.

Nevertheless, it’s quite possible that the costs of invading another country is too much for the Russian economy to bear. Having learned a tough lesson, both the Russians and the Ukrainians may be satisfied with a neutrality agreement in the region. Presumably, that would be helpful for XRP and the crypto complex.

Still, whenever you talk about XRP, you can’t avoid discussing the lawsuit leveled by the U.S. Securities and Exchange Commission.

The SEC Might Face an Uphill Battle

To quickly recap, the SEC sued Ripple Labs, the originator of the XRP coin. Primarily, the allegation is that XRP is a security rather than a cryptocurrency. If so, Ripple would have sidestepped laws governing initial public offerings and the distribution of publicly traded securities.

However, Ripple has always contended that XRP is a virtual currency. Further, the company cited convincing evidence — including the opinion of former SEC chair Jay Clayton — that a clear distinction exists between cryptos and securities.

Of course, the main issue with presenting the legal case of XRP is that it’s neither you nor me that needs convincing. What I mean is, it ultimately doesn’t matter whether I think XRP is a legitimate crypto or not. Instead, the court has to arrive at a particular decision — and such dynamics are always tricky.

Still, if you had to lean one way or the other, circumstances suggest that Ripple may be in the clear. According to legal observers, that the SEC is putting up a mighty fuss over the presiding judge’s decision to produce certain sensitive documents indicates fear within the ranks of the regulatory agency.

Admittedly, the legal observation is pure speculation and conjecture: you don’t want to base your entire decision on it. However, it is interesting that the SEC is fighting aggressively to keep its cards close to its chest.

XRP and Its Potential Legal Clarity

Assuming that Ripple does come out of this lawsuit with a judgment in its favor, it could have massive implications for XRP. Basically, should the company win, the underlying coin will be the only virtual currency with a federal framework.

Indeed, receiving official guidance on operational capacity and legal boundaries has kept many institutions on the sidelines. True, cryptos are gaining mainstream integration all the time. However, the number of merchants and businesses that accept crypto as money is extremely small compared to fiat-based payment platforms. Again, part of this problem could be due to lack of legal clarity.

Well, if Ripple wins — and to be fair, that’s a big “if” — more institutions may be willing to use XRP as the basis for its digital payment endeavors. Not only that, anecdotal evidence points to the prospect that while it’s impossible to know which party will receive a favorable judgment, the SEC is likely not having an easy time presenting its case.

Therefore, it’s not out of the realm of possibility that Ripple could come out of this mess the victor — and boy, what a victory that would be for XRP!

Trade Carefully

Fundamentally, it’s difficult to judge any crypto project. However, XRP raises the challenge exponentially because of the lawsuit. Even if Ripple created the greatest blockchain architecture ever, if the court delivers a negative surprise to the company, that’s it. XRP would likely be done.

Therefore, I don’t like the idea of going all-in on this coin. Still, if you have some loose change lying around, the narrative may have shifted more favorably for the controversial asset. The SEC is apparently having difficulties making its arguments, which is potentially great news for XRP.

On the date of publication, Josh Enomoto held a LONG position in XRP. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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