After five years of litigation with the U.S. Securities and Exchange Commission, crypto company Ripple Labs and its founder, Chris Larsen, are walking away with a far better outcome than they once faced. A possible $2 billion fine was walked back to $125 million last week, the SEC announced Thursday.
This decision was “a long time coming,” said Larsen by phone.
“That case should’ve never been brought,” he said. “It was designed to destroy the industry, at a time when the government didn’t understand the implications.” The SEC, Larsen added, went after “good actors” in the cryptocurrency industry in previous years, rather than putting up “regulatory guardrails.”
“We obviously think that it’s a really good thing,” he said of the $125 million settlement. “That’s really good for the industry, and really good for the Bay Area.”
San Francisco used to be the crypto capital of the world, he said, and thanks to rulings like these, it’s becoming that again. Coinbase, another San Francisco-based cryptocurrency company that the SEC charged in 2023 with operating as an unauthorized securities exchange, has also said that it is benefitting from the government’s new crypto-friendly attitude.
Ripple is now “on the offense,” said Larsen. It acquired the stablecoin platform Rail for $200 million on Aug. 7, the same day that the SEC announced that it was dismissing its appeal. Rail was the first of many future acquisitions, Larsen said. “We’re looking for others.”
Larsen is one of the biggest political donors in San Francisco. He previously funneled around $1.3 million into the campaigns of former Mayor London Breed and her ballot measures, and his nonprofit Avenue Greenlight contributed $3 million to power-washing street cleaning initiatives under Mayor Daniel Lurie.
But the majority of Larsen’s contributions have gone toward law enforcement surveillance technologies — including a $9.4 million donation to the San Francisco Police Department’s new drone program, and a quarter of a million dollars into the proposition that expanded SFPD’s use of surveillance cameras.
‘Looking down the barrel of a billion-dollar gun’
A major reason for the government’s about-face in the Ripple case, said multiple law professors specializing in financial practices, was that Ripple was able to wait until a favorable government was in power.
“One of the things you can do when you represent a company in a political space is you can wait until a more friendly administration comes in,” said Ilya Beylin, a professor of law at Seton Hall University.
“Whether this is luck, or whether Ripple’s counsel was really waiting for this outcome, we’ll never know,” he continued.
The SEC’s suit against Larsen’s Ripple Labs began in 2020. Ripple, which runs its own peer-to-peer transaction through a cryptocurrency called XRP, is centralized — unlike cryptocurrencies like Bitcoin and Ethereum. The SEC argued that Ripple needed to disclose all XRP tokens as if they were stocks, since the crypto company advertised their XRP as an investment (as part of the settlement, XRP will now be disclosed as stock when Ripple sells it to institutional investors, like banks, insurance companies, and endowments).
President Joe Biden’s SEC denounced in a scathing 2024 court document the “egregiousness of Ripple’s misconduct,” and wrote that the crypto company had disregarded previous rulings, allowing it to rake in billions of dollars in profits. While the court’s earlier summary judgment asked for $125 million, the SEC sought $2 billion.
“Ripple has not accepted responsibility for its near-decade long violations of the law,” wrote the SEC attorneys.
Larsen previously said that his company did not break the law. Unlike Sam Bankman-Fried — who took advantage of lack of SEC oversight to defraud investors and ultimately was thrown behind bars — this was not a criminal matter and the Department of Justice was not involved. But the SEC’s attorneys under Biden alleged that Larsen’s company still acted illegally, writing that “the evidence establishes that Ripple, in fact, intended to evade the law.”
The Trump administration’s SEC disagreed.
While prior SEC chair Gary Gensler was seen by many in the crypto industry as an adversary, his successor, Paul Atkins, “came in more or less with a mandate to nurture the crypto industry,” said Beylin. Not only that, he continued, Atkins was chosen by President Donald Trump for his crypto-friendly attitude — just recently, Atkins publicly said that “most crypto assets are not securities.”
Both Atkins and SEC Commissioner Hester Peirce have celebrated the Ripple settlement online, writing that it allows the SEC to move from litigation toward regulation.
Benjamin Edwards, a law professor at the WIlliam S. Boyd School of Law at the University of Nevada, Las Vegas, said while he sees Ripple as “generally a good faith actor,” the SEC is “captured by the crypto industry.” The $125 million fine, said Edwards, had to be levied despite the new administration, because of the strength of the SEC’s first ruling in 2023.
Had a Democrat won the presidency, Ripple “might’ve been looking down the barrel of a billion-dollar gun,” Edwards added.
“Ripple was on the hook — and I mean on the hook like a fish,” said Edwards, who specializes in business and securities law. “The hook was in Ripple’s mouth, and they’re being dragged along the ground.”
No longer. “I sorta expect Ripple is gonna make a lot more than $125 million in the next couple of years,” Edwards said.
