Ripple CEO Brad Garlinghouse revealed that the company came close to shutting down its business in late 2020. After the SEC sued the issuer of XRP, top management seriously discussed dissolving the company and handing its coins to shareholders. The detail only became public now, years after the lawsuit ended.
What happened after the SEC lawsuit in 2020?
In December 2020, the U.S. Securities and Exchange Commission sued Ripple. The agency accused the company of selling billions of dollars worth of XRP as an unregistered security.
The legal core of the dispute came down to the so-called Howey test, a standard used to determine whether a financial instrument counts as an investment contract. The SEC argued that XRP sales to institutional investors met every element of such a contract, while Ripple disputed that logic for the token as a whole.
The market reaction came fast: XRP's price fell by almost half within days. Several major U.S. exchanges, including Coinbase, halted XRP trading around the same time over their own regulatory concerns. The token effectively disappeared from the biggest U.S. trading venues for a while.
That regulatory push also hit other major market players, including exchanges Coinbase and Binance, which later faced similar accusations. The Ripple case turned into the loudest test of whether a court could actually settle a token's status as a security.
Garlinghouse described these events at an event at the University of Kansas School of Business. He said that right after the lawsuit news broke, he met with co-founder Chris Larsen to discuss the company's next steps.
Why did leadership consider shutting the company down?
The government agency had close to unlimited resources for a drawn-out court fight. The first option the founders discussed looked far simpler than an open legal battle.
Ripple held a large stash of XRP. The company could simply distribute those coins to shareholders on a pro rata basis and cease operations afterward. Formally, a lawsuit against a company that no longer existed would lose its point.
At the time, no one at the company could say for sure how long the case would drag on or how much it would cost. Other projects facing SEC claims were opting for quick settlements and admissions of guilt just to close the matter. Ripple deliberately turned away from that path.
That approach would have spared Ripple from hiring an army of lawyers and spending years in court with no guarantee of winning. But it had a downside too.
- Shutdown option: dissolve Ripple and hand its existing XRP to shareholders on a pro rata basis
- Avoid millions in legal fees and years of litigation
- Lose hundreds of company jobs
- Leave the cross-border payments market without one of its biggest players
- Risk the trust of partner banks that had already built Ripple's technology into their systems
Ripple did not pause its core business during the legal fight. The company kept signing new bank partners for its RippleNet cross-border payments network despite the regulatory uncertainty in the U.S. That gave leadership another reason not to close the company but to defend its position in court instead.
Garlinghouse and Larsen ultimately chose a different path. They decided to fight in court, even though the outcome was far from certain at the time.
What did beating the SEC cost?
The court case dragged on for four years. Ripple spent roughly $150 million on legal defense during that period.
The turning point came with a ruling from Judge Analisa Torres: she found that XRP sales on open exchanges to retail investors did not meet the definition of a security. Sales of XRP to large institutional buyers, however, were ruled a securities law violation.
A year after that ruling, the two sides effectively agreed to close the remaining open questions, and the SEC dropped its appeal against part of the verdict. The case was finally settled last year, after new SEC leadership took a noticeably friendlier stance toward crypto assets.
"I'm glad in retrospect, but that was not obvious at the time."
- Brad Garlinghouse, CEO of Ripple, speaking at the University of Kansas School of Business, July 2026
How did the win affect XRP's standing?
The court ruling became a reference point for the whole industry. Companies that previously chose quick settlements with regulators now had an example showing that a long, expensive fight can end in victory too.
For ordinary XRP holders, the win meant something more concrete: the token returned to leading U.S. exchanges, and liquidity gradually recovered to pre-lawsuit levels. Coinbase relisted XRP right after the ruling, and other major platforms followed suit. The outcome also gave confidence to other token issuers that had avoided public listings in the U.S. out of fear of repeating Ripple's ordeal.
Ripple, for its part, keeps expanding its regulatory footprint outside the U.S. Earlier this year the company secured preliminary CASP approval under MiCA in Luxembourg, letting it operate across the European Union under a single set of rules. For XRP holders, that regulatory stability means fewer risks of sudden exchange restrictions.
What comes next for the industry?
The lawsuit was filed in December 2020. It only got settled four years later, once SEC policy toward crypto shifted noticeably. During that stretch, the industry saw several more high-profile lawsuits against other major companies.
Ripple's story shows that even the threat of shutting down doesn't always mean a long-term loss. For the rest of the crypto industry, it's a signal not to rush into surrendering to a regulator when a company's position is strong enough.
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