Key Takeaways
Ripple CEO Reveals They Almost Decided To SHUT DOWN RIPPLE After The SEC Sued Them In 2020
- Ripple's leadership considered winding down the company rather than fight the SEC's 2020 lawsuit
- The four-year legal battle cost Ripple $150 million before settling under the Trump administration
- The case outcome helped establish that XRP isn't a security when sold to retail investors
Ripple came close to folding rather than fighting the SEC's lawsuit against the company, CEO Brad Garlinghouse revealed in a talk at the University of Kansas School of Business. He and co-founder Chris Larsen seriously discussed shuttering operations and distributing Ripple's XRP holdings to shareholders instead of battling a regulator with, as Garlinghouse put it, "infinite power and resources."
The company ultimately chose to fight. Garlinghouse said the decision came down to protecting hundreds of employees who would have lost their jobs. "I'm glad in retrospect, but that was not obvious at the time," he told the audience, according to CoinDesk's reporting on July 12.
What did the SEC lawsuit actually cost Ripple?
The numbers are stark. Ripple spent $150 million over four years defending itself against the SEC's allegations. The agency sued Ripple, Garlinghouse, and Larsen in December 2020, claiming the company had sold XRP as an unregistered security and raised over $1.3 billion illegally.
Beyond direct legal fees, the lawsuit froze Ripple's business development in the United States. Major exchanges delisted XRP. Partnerships stalled. The company shifted focus to international markets while the case dragged through federal court.
How did the case end?
Ripple scored a partial victory in 2023 when Judge Analisa Torres ruled that XRP was subject to securities laws only when sold to institutional investors. Sales on exchanges to retail buyers didn't count as securities transactions. This distinction mattered enormously for the broader crypto industry, as it suggested not all token sales trigger SEC registration requirements.
The company and SEC settled last year as the Trump administration pulled back on crypto enforcement. That timing wasn't coincidental. The administration's lighter regulatory touch gave Ripple an exit ramp it might not have found under different leadership at the SEC.
What Garlinghouse's candor signals
CEOs rarely admit they considered shutting down. Garlinghouse's openness at Kansas suggests Ripple now feels secure enough to discuss how precarious things got. It's also a warning shot to other crypto firms: fighting the federal government requires deep pockets and conviction that the business is worth saving at any cost.
Stuart Alderoty, Ripple's Chief Legal Officer, framed the case during litigation as being about more than one company. "This case is not just about Ripple, it's about the entire crypto industry and regulatory clarity in the United States," he said. That framing helped rally industry support, but it also raised the stakes for Ripple's leadership. Walking away would have looked like surrender.
Stablecoins are gaining where crypto stalled
While Ripple fought its legal battle, the institutional crypto landscape shifted. Stablecoins have crossed onto corporate finance agendas in ways that broader crypto hasn't. PYMNTS research shows 42% of middle market companies have discussed, tested, or used stablecoins, compared to 30% for other cryptocurrencies. Actual usage remains low, with just 13% using stablecoins today and 5% using crypto.
BNY's expanded partnership with Circle last month underscores where traditional finance sees opportunity. Banks already have regulated custody, payment infrastructure, and treasury services. Adding stablecoin custody could strengthen their position with institutional clients without requiring them to issue their own tokens.
Logicity's Take
Garlinghouse's admission offers a rare look at the calculus crypto companies face when regulators come calling. $150 million in legal fees is a number most firms can't absorb. Ripple survived because it had substantial XRP reserves and enough revenue to keep operating while fighting. Smaller projects facing SEC scrutiny won't have that option. The case also shows timing matters enormously. Ripple settled under favorable political conditions. Companies in regulatory crosshairs today should be thinking about which administration might give them the best exit, not just whether they can win in court.
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Frequently Asked Questions
Why did the SEC sue Ripple in 2020?
The SEC alleged that Ripple sold XRP as an unregistered security, raising over $1.3 billion illegally. The agency named CEO Brad Garlinghouse and co-founder Chris Larsen as defendants.
What was the outcome of the Ripple SEC case?
In 2023, a judge ruled XRP was a security only when sold to institutional investors, not on retail exchanges. Ripple and the SEC settled the case in 2025 as crypto enforcement eased under the Trump administration.
How much did Ripple spend fighting the SEC?
Brad Garlinghouse said the legal battle cost Ripple $150 million over four years.
Is XRP a security?
According to Judge Analisa Torres's 2023 ruling, XRP is subject to securities laws when sold to institutional investors but not when traded on public exchanges to retail buyers.
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Source: PYMNTS | / PYMNTS
Manaal Khan
Tech & Innovation Writer
Produced with AI assistance and reviewed by the Logicity editorial team. Learn more in our Editorial Policy.
