Ripple Labs spent $690,000 on lobbying in the United States in 2020, however they failed to save the company from legal proceedings by the Securities and Exchange Commission (SEC).
According to the lobbying revelations, Ripple’s lobbying programme has overtaken other companies in the cryptocurrency industry in 2020.
Meanwhile, cryptocurrency exchanges such as Binance US, Gemini and Kraken have reported no such spending. One of the world’s largest exchanges with more than 13.3 million users, Coinbase, spent $230,000 on lobbying in the same period.
In early 2020, Ripple discontinued its internal lobbying team to move contracts to professional law firms. The activities that Ripple sponsors are primarily aimed at legislation before Congress such as the Token Taxonomy Act and the Digital Commodity Exchange Act.
This approach is quite similar to big technologies like Uber and Grab. These ride-hailing platforms work on the concept of moving forward to gain market share, acting through lobbying. If you wait until the legislation is fully in place, it becomes too late to compete or too expensive to regain market share. Especially the grey area with indistinct laws.
Ripple’s lobbying activities have not stopped the SEC
Despite this, Ripple is not avoiding scrutiny from the US Securities and Exchange Commission (SEC). On 22 December 2020, the SEC filed a complaint against Ripple Labs, Inc. and two of its executives, Brad Garlinghouse and Chris Larsen, in the US Southern District Court in New York. The SEC accused Ripple Labs, the company behind the XRP cryptocurrency, of violating digital asset regulations.
In its complaint, the Commission pointed to a simple pattern of selling XRP that was never registered with the SEC or under any registration exemption. In the Commission’s view, this led to continued sustained activity of illegal sales of unregistered andon-exempt securities under Section 5 of the Securities Act of 1933.
Now, 7 years after XRP and Ripple Labs were created, the SEC claims that the individuals accused in the lawsuit as well as Ripple Labs have received many warnings not to continue down the path they were on, but have been ignored.
The SEC has taken action against many ICO projects in recent years, but Ripple is the biggest case of all. After the SEC filed a lawsuit against Ripple for selling tokens as unregistered securities worth $1.3 billion, many major exchanges began removing XRP, and this trend is likely to continue. However, regardless of how this case is resolved in court, it has already caused very significant damage to the company and the price of the XRP token.
Ripple has always been in a state of controversy within the industry. As one of the oldest projects, it caught the eye of many retail investors very early on. Through the advantages of that retail sale, the project once held third place by market capitalisation on CoinMarketCap. But many cryptocurrency analysts have been doubting its future for a long time.
On the one hand, there is Ripple Labs, which is a growing company with a large number of institutional clients. On the other hand, the XRP token has little to do with what this company is doing. In relation to the Biden administration announced on January 17, 2021, the intention to appoint Gary Gensler as chairman of the SEC may present advantages for Ripple, considering the CEO’s support for Joe Biden’s campaign. In any case, the risk is still very high.