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Ripple Labs, the company behind XRP, has been engaged in a legal battle with the U.S. Securities and Exchange Commission (SEC) since late 2020. The point at issue is whether XRP is a security.

The SEC filed a lawsuit against Ripple Labs and two of its executives on December 22, 2020, alleging that the defendants illegally traded $ 1.3 billion in XRP token without filing it with the SEC. Ripple has responded forcefully, contending that the SEC’s evaluation has been prejudiced.

When deciding whether or not a cryptocurrency is a security, the SEC applies the “Howey test,” named after the Supreme Court’s 1946 decision in SEC v. W.J. Howey Co. Following the Howey test logic, an asset is classified as a security if it’s traded with the expectation of earning profits. The SEC’s legal action against XRP uses a description of the cryptocurrency that indicates it meets the Howey test, meaning XRP is a security and must be listed with the SEC.

Ripple has chosen to fight the SEC rather than compromise like most other businesses in comparable situations. Whatever the judge rules, it will have major repercussions for the crypto industry. It’s possible that the SEC’s reputation will take a hit if Ripple wins, allowing other crypto businesses the nerve to rebel. If the SEC prevails, however, it could significantly alter how crypto companies currently function and bring in a new age of registration rules for securities.

Released in 2021, the XRP Ledger (XRPL) is a permissionless, open-source, decentralized technology. The XRP Ledger has many advantages, such as cheap transaction fees ($ 0.0002), fast settlement times (3-5 seconds), high throughput (1,500 transactions per second), and sustainability. The XRP Ledger protocol also features the first built-in decentralized exchange (DEX) and bespoke tokenization capabilities. Since its inception, the XRP Ledger has consistently processed 70 million ledger transactions.

Unlike Bitcoin and Ethereum, the XRP Ledger Network employs a unique Federated Consensus method to validate transactions. Validators are selected independent servers that agree on the sequence and conclusion of XRP transactions on the XRPL. Transactions that follow the protocol are instantly verified and handled equally across all computers in the network. Validators can be used by anyone, and all financial transactions are publicly available. There are currently more than 150 validators working on the ledger. These are exchanges, organizations, and private individuals from all over the world.