XRP News: Legal Battles Looming – Ripple vs. SEC Unveils Uncertainties

The Sunday Overview

On Sunday, XRP gained 1.35%. Partially reversing a 2.69% loss from Saturday, XRP ended the session at $0.5571.

SEC v Ripple: Remedies-Related Discovery

On Sunday, there were no SEC v Ripple case-related updates to consider. Remedies-related discovery ends on Tuesday. After discovery, the SEC and Ripple will argue for and against a punitive disgorgement.

In July, Judge Analisa Torres ruled Ripple breached Section 5 of the US Securities Act for selling XRP to institutional investors. The influence of the penalty on XRP will hinge on the size of the penalty and whether the size could materially impact Ripple’s ability to continue doing business.

SEC plans to appeal against the Programmatic Sales of XRP ruling may have greater significance. In July, Judge Torres also ruled programmatic sales of XRP do not satisfy the third prong of the Howey Test.

SEC v Ripple: Programmatic Sales and an Appeal

In October, Judge Torres rejected the SEC motion for interlocutory appeal. As a result, the SEC must wait until the end of the trial to appeal against court rulings. Judge Torres could decide on a penalty by the summer, meaning the SEC could appeal this year and extend the case into 2025.

The uncertainty regarding the potential reversal of the Programmatic Sales ruling increased due to developments in the SEC v Terraform Labs case. In December, Judge Rakoff ruled Luna and TerraUSD were securities.

However, two curveballs could significantly affect SEC plans to appeal the Programmatic Sales ruling.

Curveball One

The outcome of an ongoing investigation into possible conflicts of interest within the SEC could affect the direction of the SEC v Ripple case.

On Thursday, Empower Oversight issued a press release saying the Office of Inspector General was in the final stages of an investigation. The investigation related to reports of conflicts of interest. Empower Oversight reported the conflict-of-interest issues to the OIG in 2022.

Significantly, Empower Oversight filed a lawsuit against the SEC in 2021, claiming former SEC officials were biased against Ripple Labs and XRP.

If the OIG finds wrongdoing, the SEC may end plans to appeal the ruling, a boon for XRP and the broader market.

Curveball Two

The second curveball could be the SEC v Coinbase (COIN) case. Coinbase filed a Motion to Dismiss (MTD) in August, arguing the SEC lacks the statutory authority to regulate US crypto exchanges.

Amicus Curiae attorney and CryptoLaw US founder John E. Deaton believed the SEC would settle the case against Ripple if the Court grants the Coinbase MTD. In September, Deaton said,

“I doubt the Solicitor General would allow an appeal in that scenario, one that could reach the Supreme Court, allowing for the High Court to strip away, not only the SEC’s power, but all other federal agencies as well.”

A court ruling on the Coinbase MTD could happen at any time. Judge Katherine Failla heard oral arguments from both sides on January 17.

The OIG investigation and the ruling on the Coinbase MTD could firmly shut the door on SEC plans to appeal. Adverse outcomes for the SEC may also force the SEC to step back from regulating the crypto space by enforcement.

XRP Price Action

Daily Chart

XRP held above the 50-day and 200 EMAs, sending bullish price signals. XRP broke above the 50-day EMA on Sunday and through the 200-day EMA on Monday.

An XRP break above the Friday high of $0.5796 would support a move to the $0.5835 resistance level.

SEC v Ripple and Coinbase case-related chatter, SEC activity, and updates from the OIG investigation need consideration.

However, a break below the 200-day EMA would support a fall to the 50-day EMA and the $0.5470 support level.

The 14-day RSI reading, 59.50, indicates an XRP move to the $0.5835 resistance level before entering overbought territory.

4-Hourly Chart

On the 4-hourly, XRP sat above the 50-day and 200-day EMAs, sending bullish price signals.

An XRP move to the $0.57 handle would bring the $0.5835 resistance level into play.

However, a drop below the $0.5470 support level and 50-day EMA would give the bears a run at the 200-day EMA.

The 4-hourly RSI, with a reading of 58.07, suggests an XRP move to the $0.5835 resistance level before entering overbought territory.