Ripple Weighed Shutting Down After SEC XRP Lawsuit, Garlinghouse Says

A Near Shutdown After the SEC Case

Garlinghouse said the lawsuit was one of the hardest moments of his tenure. The SEC sued Ripple in 2020 and also named Garlinghouse and Ripple co-founder Chris Larsen, alleging that XRP sales involved unregistered securities.

In the interview on the KU Hustle podcast at the University of Kansas School of Business, Garlinghouse said Ripple seriously weighed ending operations altogether. He said the company held substantial XRP and could have shut down and distributed those holdings to shareholders on a pro rata basis. He presented that as a scenario the company considered, not one it ultimately carried out.

Garlinghouse also said such a move might have offered a simpler exit from the dispute, but would have come with major consequences. According to his account, shutting down would have cost hundreds of employees their jobs and ended the company’s future as an operating business.

The Cost of Fighting the Case

Ripple instead chose to remain in operation and challenge the SEC’s claims. Garlinghouse said that decision was far from straightforward at the time, even if he now views it differently in hindsight.

He said the company spent about $150 million on legal fees during its roughly four-year fight with the regulator. He also said Ripple’s U.S. business was largely stalled for about five years after the lawsuit began, underscoring the operational damage the case caused even as the company kept going.

Garlinghouse disputed the SEC’s position on XRP, saying he saw the token as more comparable to bitcoin than to a security issued and controlled in the manner alleged by regulators. He also said that before the lawsuit, he met with SEC officials four times between 2017 and 2019 to explain Ripple’s use of blockchain technology and XRP in its payments business. According to Garlinghouse, those meetings did not produce any indication from regulators that XRP might be treated as a security.

How the Case Ended

The SEC’s original complaint alleged that Ripple raised $1.3 billion through XRP sales that should have been registered as securities offerings. In 2023, U.S. District Judge Analisa Torres issued a split ruling that became central to the case. The court found that XRP sales on public exchanges were not securities transactions, while treating sales to institutional investors differently under securities law.

Ripple was later ordered to pay a $125 million civil penalty and accept an injunction tied to securities law compliance. Both Ripple and the SEC appealed different parts of the ruling, but those appeals were later withdrawn. The case formally ended in August 2025 after the appeal process was dropped and the court proceedings concluded.

A Different Regulatory Climate

The source article links the final phase of the dispute to broader changes in Washington. After a leadership change at the SEC under Chairman Paul Atkins and under the Trump administration, the agency was described as moving away from a regulation-by-enforcement approach. The shift, as presented in the report, involved a more deregulatory stance, greater engagement with the crypto sector, and more emphasis on traditional fraud cases than on sweeping corporate penalties.

Garlinghouse’s comments add a new internal detail to a case that shaped Ripple’s U.S. operations for years. His account suggests the company did not simply defend itself as a matter of course, but first weighed whether survival as a business was worth the legal expense, uncertainty, and disruption caused by the SEC action.