The U.S. Securities and Exchange Commission filed a lawsuit in 2020 alleging that Ripple Labs Inc. sold its native cryptocurrency XRP to investors, without first registering it as a security.

[The SEC’s stance]
The SEC argues that XRP is a security because it fulfills one of the Howey test conditions that “profits can be derived from the efforts of others.” If all 4 conditions are fulfilled, it means the transaction in question is considered an investment contract and thus, a security.

[Ripple’s stance]
Ripple argues that XRP is a digital currency used for cross-border transactions and is not a security. In addition, they believe the 1946-created Howey test features outdated conditions that cannot be accurately applied for establishing crypto industry regulations.

[The current situation]
The current industry consensus is that Ripple will win the lawsuit, given that the presiding judge has taken issue with SEC’s allegations and the case is likely to end as a settlement. It won’t be an easy battle for Ripple however, considering the SEC firmly enforces its regulations and has never lost a securities violation case so far.

Though the outcome is yet to be determined, what is clear is that it could very well influence the future of the crypto industry at large.