For nearly five years, crypto investors have been waiting patiently for XRP (XRP 0.73%) to return to its early glory days. At one time, people referred to XRP as "a better Bitcoin (BTC -0.35%)," and its future seemed bright. However, since January 2018 -- when it peaked at $3.84 -- XRP has seemingly done nothing but shrink.
While XRP still ranks as the sixth-largest crypto in the world with a $21 billion market capitalization, it has been in a holding pattern for the past two years amid a pending legal case with the Securities and Exchange Commission (SEC). Signs of a breakthrough in this case came in late 2022, and XRP briefly rallied on the news. But the latest update from Ripple Labs, the team behind XRP, is that nothing is going to happen with the SEC case until June at the earliest. So is it finally time to give up on this former crypto darling?
XRP vs. the SEC
There is a lot to unpack here. There's the Ripple payment network, which is a blockchain-powered network for cross-border payments. There's XRP, which is the native crypto token of the Ripple payment network. If you want to send money over this network, you need to use XRP. And there's Ripple Labs, the California-based company that created the Ripple payment protocol and controls the development of the Ripple payment network.
According to the SEC, the Ripple Labs team engaged in a series of unregistered securities offerings when it sold XRP tokens to the public over a multiyear period. According to Ripple Labs, though, XRP was never a security and is still not a security -- it's a cryptocurrency. It asserts that XRP tokens were sold to the public in the same way as other cryptocurrencies are sold to investors: via an initial coin offering (ICO). Moreover, it says that XRP is simply a governance token of the payment network, not a business interest in Ripple Labs, so it can't possibly be a security.
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Because of the complexities and nuances involved, the SEC's case has been interminable, with memo after memo, briefing after briefing, and the goalposts always seem to be moving. Speaking at this year's World Economic Forum in Davos, Switzerland, Ripple Chief Executive Officer Brad Garlinghouse said that a final decision by the courts would come "sometime in the coming single-digit months," but June at the earliest. That might only be six to nine months, but that's an eternity in the crypto world. And would you really be willing to wait nine more months, only to find out that your investment in XRP is almost worthless?
XRP scenarios
In many ways, the ruling in this case will determine the future of XRP. In the best-case scenario, the judge will side with XRP, Ripple Labs will be free to build out the future of cross-border payments, the Ripple payment network will grow exponentially in size, and the price of XRP will rise. On Monday, it was trading in the neighborhood of $0.43. By some estimates, XRP could rise to $5 or higher on a positive ruling in the case.
In a worst-case scenario, though, the XRP token could go to zero. Investors could decide to give up on XRP entirely and look to invest in other blockchain networks capable of processing cross-border payments. When the Ripple payment network launched a decade ago, it was revolutionary. Now, not so much, thanks to the rise of Layer 1 blockchains like Ethereum (ETH -0.56%), which did not exist before July 2015.
Should I buy XRP?
For that reason, I can't recommend XRP as a potential investment. There's too much legal risk. If you're holding onto XRP, you're basically hoping for a favorable ruling in a make-or-break case. The links between XRP and Ripple are so extensive -- including the fact that many people still today refer to the XRP crypto as "Ripple" -- that the court might decide that XRP really is a security, and therefore the coin sales violated SEC regulations.
Alas, there are no last-minute catalysts on the way, no additional twists or turns that could save the day for XRP holders if the ruling doesn't go their way. As the Ripple legal team recently pointed out, "Everything is briefed, now we wait." If you plan on waiting this out, just be prepared to be disappointed.
