The head of cryptocurrency and blockchain company Ripple, Brad Garlinghouse, says he is hopeful that a resolution in his dispute with the US Securities and Exchange Commission will be reached in the first half of 2023.
"Judges take the time that judges take," Garlinghouse, who is a defendant in the legal drama, said in an interview with CNBC's "Squawk Box Europe" Wednesday at the World Economic Forum in Davos, Switzerland. "We are optimistic that this will certainly be resolved in 2023, and perhaps [in] The first half. So we'll see how it develops from here. But I feel very good about where we are in relation to the law and the facts."
The US Securities and Exchange Commission launched a lawsuit against Ripple in 2020, alleging that the company and its executives illegally sold XRP โ a cryptocurrency created in 2012 โ to investors without first registering it as a security.
Ripple disputes the claim, saying the token should not be considered an investment contract and is used in its business to facilitate cross-border transactions between banks and other financial institutions.
In December, Ripple and the SEC filed their final round of briefs seeking summary judgment for the case, respectively accusing each other of bending the law.
The judge could enter a judgment in favor of either party, avoiding a trial, or present the matter before a jury.
Garlinghouse said he expects a ruling "sometime in the next few single-digit months," possibly as early as June. He added that he doesn't expect the company to resolve the case, though he remains open to the prospect.
โWe have always said that we would love to do a deal, but it requires one very important thing, and that is that going forward, it is clear that XRP is not a security,โ Garlinghouse said. โThe SEC and Gary Gensler have been outspoken that they view almost all cryptocurrencies as a security. And that leaves very little room on the Venn diagram for liquidation.โ
At a September event hosted by the Practicing Law Institute, Gensler saying that the "vast majority" of cryptocurrency tokens are securities.
He later hinted that ether may also qualify as a security. Without referring to him by his name, Gensler told reporters in September that cryptocurrency "participation" mechanisms, which reward users who deposit their tokens to protect blockchain networks with interest-like payments, should count as security offerings, since "the investing public anticipates gains based on the efforts of others. Ethereum, the network behind the world's second-largest cryptocurrency, switched to that model last year.
The only cryptocurrency that the agency has made clear that it does not consider a security is bitcoin. Gensler previously stated that the world's largest cryptocurrency "doesn't have a group of people in the middle," which means investors aren't "taking a bet" on a middleman.
The XRP case has major implications for both Ripple and the broader crypto market.
A judgment declaring that XRP is a security could potentially place much stricter restrictions on Ripple regarding the token. This could include requirements for transparency disclosures and increased investor protections, similar to taxes on regulated stockbrokers.
It may also set a precedent for dozens of other crypto and blockchain projects that could be classified as securities.
Emphasizing the importance of the lawsuit outcome, Garlinghouse said Wednesday: "Something I've heard repeatedly here in Davos is how important this is not only to Ripple... but also, really, to the entire cryptocurrency industry in the United States".
He added: โI keep reminding people that outside of the United States, cryptocurrencies continue to thrive, Ripple continues to thrive, and we need to make sure we continue to engage regulators outside of the United States as well.โ
'Shameful' behavior
In a separate fireside discussion with CNBC's Arjun Kharpal on Wednesday, Garlinghouse issued a stern rebuke of the SEC's legal battle with his firm, saying the watchdog's conduct so far had been "disgraceful."
"From the beginning I thought it was very clear that the facts were on our side, that the law was on our side," he said. "And I think as he's seen this play out, as he's seen the documents filed in court, the judge is certainly listening to our arguments."
He continued: "The behavior of the SEC in part has been disgraceful as a US citizen. Just some of the things that have been going on, like you're kidding."
He said the United States is "notably absent" from the list of regulators developing crypto-friendly rules. The United Arab Emirates, Japan, Singapore, Switzerland and the United Kingdom are some of the forerunners in this regard, in his opinion.
As part of the legal proceedings, Ripple fought to obtain documents related to a June 2018 speech by former SEC official Bill Hinman, which it says helped the case. In the speech, Hinman says that rival sales ether "they are not securities transactions."
XRP was once the third largest cryptocurrency, with a market value of $120 billion in early 2018. It has fallen sharply since then, amid US regulatory scrutiny and a broader recession in bitcoins and other digital currencies. XRP now has a market capitalization of approximately $20 billion, according to data from CoinMarketCap.
