Schwartz says SEC treated XRP as a security in $150M legal fight

David Schwartz challenged the SEC's contradictory stance on XRP, saying the agency treated the token as a security despite calling it "just code."

Ripple CTO Emeritus David Schwartz said the U.S. Securities and Exchange Commission treated XRP as a security in practice even after acknowledging the token itself was not inherently one, disputing a former agency attorney's interpretation of the landmark case.

"The SEC's position created a fundamental contradiction — they publicly stated the code was not a security, yet pursued enforcement actions that treated it exactly as one," Schwartz said, according to a statement released July 16. He was responding to a former SEC attorney who argued the agency's actions were consistent with its public statements on XRP's legal status.

The SEC sued Ripple in December 2020, alleging the company sold XRP as an unregistered security. Ripple CEO Brad Garlinghouse said the company spent about $150 million fighting the case over four years and considered shutting down entirely before deciding to contest the charges. A federal judge ruled in 2023 that XRP itself is not a security, though the case was settled last year after a change in SEC leadership under the Trump administration.

The debate carries implications beyond Ripple. The SEC's treatment of digital assets under former Chair Gary Gensler created uncertainty for dozens of tokens whose regulatory status remains unresolved. With the agency now under new leadership that has taken a more accommodating approach to crypto, Schwartz's critique highlights the lasting tension between how regulators classify tokens in theory versus how they enforce rules in practice.

The former SEC attorney had argued that the agency's enforcement actions against Ripple were legally consistent because they targeted the company's conduct — how XRP was sold and marketed — rather than the token's inherent characteristics. Schwartz rejected that distinction, saying the practical effect was the same: the SEC regulated XRP as if it were a security regardless of its stated position on the code.

Garlinghouse, speaking at the University of Kansas School of Business in fall 2025, described the personal toll of the litigation. He said he met with SEC officials four times between 2017 and 2019 without legal representation and was never told XRP might be treated as a security. That experience shaped his view that the company had been denied clear rules, he said.

The Ripple case became a watershed moment for crypto regulation in the U.S. Judge Analisa Torres's ruling that XRP is not inherently a security provided legal cover for other tokens with similar characteristics, though the SEC has not formally adopted that framework as agency policy. The case also drew comparisons to the SEC's approach under the European Union's Markets in Crypto-Assets regulation, which provides a statutory framework that the U.S. still lacks.

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