XRP Investors Can't Wait for Jan. 20

Bitcoin, the largest cryptocurrency in the world, has enjoyed a superb run with its price up about 60% this year, well ahead of the bull market. But not all cryptocurrencies have fared as well. XRP (CRYPTO: XRP), the cryptocurrency created by the founders of Ripple Labs, is down about 19% this year. It's been a frustrating few years for XRP and Ripple, which have dealt with an overhang from a Securities and Exchange Commission (SEC) lawsuit that won't go away. I am sure that many XRP investors are looking forward to Jan. 20 of next year. Here's why.

The lawsuit

In late 2020, the SEC accused Ripple Labs and two of its executives, Brad Garlinghouse and Christian Larsen, with violating securities laws when raising $1.3 billion through various sales of XRP coins. The SEC alleged that the two executives and Ripple did not register the sales with the SEC and didn't have a qualifying exemption to sell XRP without registration.

The crypto community paid close attention to the lawsuit because the outcome could determine how much regulatory jurisdiction the SEC might have over XRP and other cryptocurrencies. There is a lot of ambiguity when it comes to crypto regulation. Some like the SEC believe that many cryptocurrencies should be regulated as securities. However, crypto proponents do not want to be under the SEC's umbrella, which they believe would lead to tougher regulation. Rather, they see many cryptocurrencies as currencies that should be regulated by the Commodity Futures Trading Commission (CFTC).

In July 2023, Ripple and its executives emerged triumphant. U.S. District Judge Analisa Torres ruled that Ripple and its executives did not violate securities laws in their sales of XRP on digital asset platforms. Recently, however, the SEC appealed the ruling, suggesting that it still believes there were securities violations in some of Ripple, Garlinghouse, and Larsen's actions.

Why Jan. 20 could be important

The U.S. presidential election will conclude on Nov. 5 and the ultimate winner will be sworn into office on Jan. 20. A new president means a new administration, which could change the regulatory approach toward crypto and leadership in many agencies, including the SEC. Current SEC Chairman Gary Gensler has led the charge on the Ripple lawsuit and is considered public enemy No. 1 by many crypto stakeholders. Many would like to see Gensler removed and replaced with a leader more amenable toward crypto.

A Donald Trump victory would likely be most beneficial for XRP and crypto investors. Trump has publicly stated he would like to remove Gensler from his position and is also considered the more friendly presidential candidate toward crypto. While it's unclear if Trump could fire Gensler before his term is up, the SEC chief has historically resigned once there is a new president.

Even if Vice President Kamala Harris wins the presidency, Gensler still might be on his way out. Billionaire investor Mark Cuban, a vocal advocate for Harris, has said he thinks Harris would fire Gensler if elected. Furthermore, several reports have suggested that Harris is looking at candidates to replace Gensler if elected.

Looking forward to change

XRP investors will be looking forward to a new administration that would swap Gensler out for someone less focused on regulating crypto by the SEC. XRP would also benefit if this lawsuit ends and if it is no longer the poster child for the SEC's efforts to have more regulatory authority over cryptocurrencies. A Trump administration probably would try to remove Gensler as soon as possible. But Harris might follow a similar path. Either way, XRP investors can't wait for Jan. 20.

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Bram Berkowitz has positions in Bitcoin and XRP. The Motley Fool has positions in and recommends Bitcoin and XRP. The Motley Fool has a disclosure policy.