Ripple Considered Shutting Down After SEC Lawsuit

Ripple nearly shut down its business instead of engaging in a years-long legal battle with the U.S. Securities and Exchange Commission (SEC). CEO Brad Garlinghouse revealed that after the agency filed its lawsuit in 2020, he and co-founder Chris Larsen seriously considered closing the company.

Speaking at the University of Kansas School of Business, Garlinghouse explained that Ripple could have distributed all of its XRP holdings to shareholders based on their ownership stakes before winding down the business. He admitted that such a move would have been far easier than taking on the U.S. government, which has virtually unlimited resources.

Instead, Ripple chose to fight. According to Garlinghouse, protecting hundreds of employees played a major role in that decision. Looking back, he believes it was the right choice, although at the time the outcome was far from certain.

The SEC sued Ripple in December 2020, alleging that the company's sales of XRP constituted an unregistered securities offering. The lawsuit also named Brad Garlinghouse and Chris Larsen personally. Garlinghouse noted that between 2017 and 2019 he met with SEC officials on four separate occasions without legal counsel present, yet was never told that XRP could be considered a security. In his view, this highlights the lack of clear regulatory guidance.

Garlinghouse also revealed that the four-year legal battle cost Ripple approximately $150 million in legal expenses.

The case ultimately ended in Ripple's favor. Judge Analisa Torres ruled that XRP itself is not a security. In May last year, the parties reached a settlement following changes in SEC leadership under President Donald Trump's administration, which adopted a more crypto-friendly regulatory approach.

Ripple's experience demonstrates how regulatory uncertainty can affect even the largest companies. The lengthy dispute with the SEC came with a price tag of roughly $150 million—an amount that most businesses could never afford. Smaller companies, lacking the financial resources to sustain such an expensive legal fight, often have little choice but to shut down instead of defending their position in court.