Ripple CEO says Ripple will spend $200 million to fight SEC lawsuit

Ripple will have spent $200 million defending itself against a lawsuit from the SEC by the time it ends, CEO Brad Garlinghouse told CNBC on Monday.

“With the SEC, we’re going to spend — this is the first time I’ve shared this publicly — by the time all is said and done, we’ll have spent $200 million defending ourselves against a lawsuit, which people have been like since its inception,” Garlinghouse said during Conversation with CNBC’s Dan Murphy at the Dubai Fintech Summit: “Well, that doesn’t make much sense.”

The Securities and Exchange Commission is accusing Ripple, CEO Brad Garlinghouse, and co-founder Chris Larsen of violating US securities laws by selling XRP (a cryptocurrency closely related to Ripple) without first registering it with the regulator. Ripple disputes the SEC’s allegations, and maintains the view that XRP should be considered a digital currency rather than a security.

Ripple is not the only company that the SEC has taken enforcement action against. The watchdog has ordered Kraken, a cryptocurrency exchange, to stop offering a so-called staking service that offers users interest-like returns on their tokens after settling the fees it sells for unregistered securities.

Meanwhile, the regulator has also notified cryptocurrency exchange Coinbase that it plans to sue the company over alleged securities violations. The cryptocurrency industry has been in a rage over the SEC’s actions, with some figures warning it could force companies out of the US.

Much of what the SEC has done involves applying existing regulations to the crypto industry, which were formed several decades after the Howey Test – one of the key tests for determining whether something is safe or not.

Garlinghouse said that Chairman Gary Gensler and other SEC officials have made statements in the past that contradict the regulator’s belief that XRP is a security.

“You have a video of the chairman of the SEC, as a professor at MIT, saying that 75% of these digital assets are commodities,” he said. “And now he says they are all securities because he is the chairman of the Securities and Exchange Commission and he is looking for power and putting power before sound policy to grow an economy in the United States.”

The SEC was not immediately available for comment when contacted by CNBC.

In 2020, the US Securities and Exchange Commission initiated a lawsuit against Ripple alleging that the company and its executives illegally sold XRP, a cryptocurrency created by its founders in 2012, to investors without first registering it as collateral.

Ripple disputes this claim, saying that the token should not be considered an investment contract and used in its business to facilitate cross-border transactions between banks and other financial institutions.