The SEC has filed a lawsuit classing the XRP cryptocurrency token as unregistered security. Those on the defensive look at previous instances of EOS and KIN as examples of tokens that were launched, barely received a slap on the wrist, paid a fine, and went their funny ways.
However, a cryptanalyst with a strong understanding of the law explains exactly why this Ripple lawsuit is particularly dire and why XRP investors in the US are rightly concerned.
Ripple lawsuit: SEC shots in the crypto industry
This week, the CEO of Ripple first announced to the media that he was expecting a lawsuit from the US Securities and Exchange Commission.
The crypto market paused to process the new information and examine the possible impact of the information to come. Then XRP collapsed once investors got the severity under control.
Related reading | Ripple Lawsuit Triggers XRP Led Altcoin Apocalypse
Retail investors have panicked, and even large US-based hedge funds have now liquidated their holdings to ensure compliance with US law. The expectation is that major exchanges like Coinbase will delist the altcoin next.
The cryptocurrency instantly plummeted in total market capitalization, bleeding billions in hours. And while the “XRP Army”, analysts, and supporters came out in droves with reasons why Ripple will be okay, and their preferred centralized cryptocurrency too, this situation is at serious risk compared to others.
A look at the consequences of the SEC lawsuit. However, support continues … | Source: XRPUSD on TradingView.com
Why the XRP suit cannot be compared to EOS or KIN cases
XRP backers who hold on to what they can still take comfort in knowing that the companies behind EOS and KIN tokens have successfully put up with the SEC, paid their fines, and moved on.
Adam Cochran’s professional analyst and partner at Cinneamhain Ventures explains why the Ripple case is different.
First, the SEC claims that XRP is still an unregistered security today, while EOS and KIN tokens weren’t until the time of sale. They also have documentation of centralization, which is what the crypto community often disliked about XRP.
Related reading | Ripple Effect: What the XRP SEC lawsuit says about new crypto projects
The Ripple managers Brad Garlinghouse and Chris Larsen are expressly designated as liable in the present case. Cochran also says exchanges must delist XRP immediately or they risk breaking the securities laws themselves. The SEC has issued a statement clarifying the situation, but others have added that while exchanges that have previously offered the token to customers are somewhat lenient, they do not give them the freedom to continue doing so now after XRP was considered a security.
After all, the case could drag on for years, which would cause XRP to suffer significantly.
Featured image from deposit photos, charts from TradingView.com