The U.S. Securities and Exchange Commission (SEC) has initiated a significant legal action against Ripple Labs, proposing fines amounting to approximately $2 billion due to what it perceives as unauthorized sales of the XRP cryptocurrency. Stuart Alderoty, Ripple’s Chief Legal Officer, disclosed on Monday via social media that the SEC had presented these figures to District Judge Analisa Torres in Manhattan through confidential documents. These documents are anticipated to be released publicly on Tuesday with certain details redacted.

Following the revelation of the SEC’s demands, XRP experienced a moderation in its daily gains, ultimately trading up by 1.3% at $0.64079.

Should the court side with the SEC’s request, Ripple Labs could face one of the heftiest penalties ever imposed on a cryptocurrency entity. This action follows Judge Torres’s July verdict, which deemed Ripple Labs’ sales of XRP, totaling nearly $730 million to institutional investors, as unauthorized distributions of unregistered securities. Ripple Labs plans to challenge this decision in April.

The SEC’s lawsuit against Ripple, initiated in 2020, targets the company’s executives, Brad Garlinghouse and Chris Larsen, accusing them of conducting over $1.3 billion in unregulated securities offerings through XRP sales. Judge Torres, however, found that Ripple’s transactions on public exchanges did not constitute unregistered securities sales, a partial victory for Ripple.

The ongoing legal tussle between the SEC and Ripple is closely watched by the cryptocurrency community, as its outcome could significantly influence the regulatory landscape for crypto tokens. The SEC maintains that cryptocurrencies fall under securities law, while many in the crypto space argue for either a distinct regulatory framework or classification of digital assets under the jurisdiction of the Commodity Futures Trading Commission, suggesting they are digital commodities.

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