SEC Appeal Poses Downside Risks to Ripple Value

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"An appeal could then cause the value of XRP to dip again as the previous market anxieties could return."

A few weeks ago, one of the most high-profile court cases in the crypto world came to an end.

Ripple, the company behind the popular XRP token, emerged victorious in a legal battle against the Securities and Exchange Commission in the US, which had alleged that the company sold unregistered securities.

The declaration by the court that XRP was not a security and its listing of exchanges was not illegal was a win not just for Ripple but for the industry at large.

But now, there is talk of the SEC appealing this ruling.

Just like with the earlier ruling, this appeal could have massive implications for Ripple and its users.

This all hinges on the appeal moving forward and becoming successful, but they will be far-reaching.

First, an appeal could shake the foundation of security that Ripple users have enjoyed for the last few weeks.

When the verdict was announced, the price of XRP went up as many felt more emboldened to use the token, but this could all change.

By accusing Ripple of selling unregistered securities, XRP users were, in turn, under scrutiny as having bought securities through improper channels.

An appeal could then cause the value of XRP to dip again as the previous market anxieties could return.

For Ripple, this will mean a trip back into the courtroom, legal fees, and all the inconveniences associated with a legal scuffle with the SEC. And these will all be compounded if the initial victory that it had is now overturned.

If Ripple is found to be in the wrong and XRP is essentially declared a security, Ripple will naturally face legal ramifications like fines. But what about XRP itself?

If Ripple chooses and is allowed to continue to sell it, the company will have to register it as a security and people will still be able to buy it.

But the ways in which they will be able to use it will not be the same. You see, a lot of the uses of XRP have been as a currency and not as a security. Yes, there are those who speculatively hold XRP, but there are other uses as well.

For example, XRP is quite popular with online crypto betting. Some of the popular ones in the UK accept XRP for placing bets and those who use XRP isn’t interacting with it as a security.

Then there is XRP’s famous use case for cross-border settlements. Many over the years have turned to the token for sending money to other countries at a faster speed and with lower fees.

This is one of Ripple’s biggest use cases and once again, the token is not being used as a security. But in the event of a successful appeal, everyone who uses XRP will have to treat it as a security.

This will mean declaring taxes on any ‘gains’ they get from it, even if they were not actively trading.

For the group of XRP users who trade speculatively, this might not be a big deal, but it might be for those who do not. But while these implications are significant, it might be too early to tell if they will happen.

Since the news broke, some legal experts have come forward to give their opinions. As one put it, an overturn, if it happens at all, will not come for another two years.

Ripple CEO Brad Garlinghouse has also spoken out about the SEC allegedly overstepping its legal bounds and considers the victory one for the entire industry.