CEO Brad Garlinghouse Just Sent XRP (Ripple) Soaring

Since the late afternoon yesterday, the price of XRP (CRYPTO: XRP) had zipped roughly 10% higher as of 10:16 a.m. ET. Ripple CEO Brad Garlinghouse announced in a video on X that the U.S. Securities and Exchange Commission (SEC) plans to drop its appeal in a long-standing lawsuit against Ripple, the company behind XRP.

A significant overhang

A little over four years ago, the SEC sued Ripple, Garlinghouse, and Co-Founder Chris Larsen, claiming that the parties sold XRP as an unregistered security back in 2013. The case was a big deal for the crypto community because it could set precedent on whether many cryptocurrencies would be deemed securities and therefore how much regulatory jurisdiction the SEC holds over these cryptocurrencies.

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In 2023, a federal judge ruled that when Ripple was sold to institutional investors it did qualify as a security. However, when it was sold to retail investors through exchanges, it was not a security because retail traders did not know the origin of the token. Following this ruling, the SEC appealed parts of the decision.

"This case was doomed from the start," Garlinghouse said on X. "In so many ways, it was the first major shot fired in the war on crypto. I truly felt like I knew then that Ripple was not only on the right side of the law, but I felt that we were also going to be proven to be on the right side of history."

Clearing the path for an ETF

The lawsuit clearly was an overhang on XRP, which had really struggled leading up to President Donald Trump's election victory last November. Since then, the token has outperformed because I think investors predicted that the SEC would eventually drop its appeal. Removing this legal overhang should also make it easier for companies to form spot XRP exchange-traded funds (ETFs), which should increase liquidity and exposure to the token.

I think a lot of these events have been priced in to XRP in recent months or you might have seen an even stronger reaction today. Nevertheless, it's great news for the token. I think it's OK for investors to take a smaller, more speculative position in XRP, although I wouldn't necessarily load the boat because it's a volatile token in a volatile sector.

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Bram Berkowitz has positions in XRP. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.