XRP was created by Ripple to be a speedy, less costly and more scalable alternative to both other digital assets and existing monetary payment platforms like SWIFT. RippleNet’s ledger is maintained by the global XRP Community, with Ripple the company as an active member. The XRP Ledger processes transactions roughly every 3-5 seconds, or whenever independent validator nodes come to a consensus on both the order and validity of XRP transactions — as opposed to proof-of-work mining like Bitcoin (BTC). Anyone can be a Ripple validator, and the list is currently made up of Ripple along with universities, financial institutions and others.
A class action was filed against Ripple in May 2018 “alleging that it led a scheme to raise hundreds of millions of dollars through unregistered sales of its XRP tokens”. According to the complaint, “the company created billions of coins ‘out of thin air’ and then profited by selling them to the public in ‘what is essentially a never-ending initial coin offering'”. The U.S. Securities and Exchange Commission (SEC) initiated legal proceedings against Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen on December 21, 2020, for allegedly selling unregistered securities. In the lawsuit, the SEC claimed that XRP was a security instead of a commodity, because it was generated and distributed by Ripple Labs in a centralized fashion and was not being adopted by financial institutions for its advertised use cases. The SEC stated that Ripple executives sold 14.6 billion units of XRP for more than $1.38 billion to fund the company’s operations and enrich themselves.
In response, Garlinghouse criticized the SEC and indicated that Ripple Labs would defend itself in court. Coinbase delisted XRP on December 28; an investor filed a class action on December 30 alleging that Coinbase sold XRP tokens with the understanding that they were unregistered securities.