Ripple would get back $75 million of the $125 million penalty to which it consented last August under an agreement the crypto firm made with the Securities and Exchange Commission in a court filing Thursday.
A Democratic commissioner with the regulator, however, dissented with the proposal, saying the settlement, “alongside the programmatic disassembly of the SEC’s crypto enforcement program, does a tremendous disservice to the investing public and undermines the court’s role in interpreting our securities laws.”
“This is not a settlement I can support,” SEC Commissioner Caroline Crenshaw wrote Thursday.
Under Thursday’s agreement, Ripple and the SEC will ask a district court to dissolve the injunction connected to Judge Analisa Torres’ August 2024 ruling and release the $125 million that is held in escrow. The SEC would then hold on to $50 million of that. The rest would be returned to Ripple.
Ripple executives – usually vocal when their company notches what may be considered a legal victory – were uncharacteristically silent on the matter on social media Thursday.
The settlement, however, is far from a done deal. Torres first must agree to the settlement. Then, presumably, the SEC and Ripple would ask the Second Circuit Court of Appeals for a limited remand back to Torres, which, if granted, would spur another motion to be filed for the agreed settlement, former federal prosecutor James Filan wrote Thursday on X, in an analysis that Ripple Chief Legal Officer Stuart Alderoty reposted.
“After the injunction is dissolved and the funds distributed, the SEC and Ripple will ask the Court of Appeals to dismiss the SEC’s appeal and Ripple’s cross-appeal,” Filan wrote. “Then it will be over.”
The SEC signaled in March that it would drop its appeal against Ripple, marking a retreat in a four-year fight that Ripple CEO Brad Garlinghouse called “the first major shot fired in the war on crypto.”
The regulator sued Ripple in December 2020, alleging that sales of the company’s XRP token constituted offering an unregistered security.
Torres gave Ripple and the agency each a partial win in July 2023, ruling that the sale of XRP on public exchanges didn’t violate federal securities laws, but that XRP was a security when sold to institutional investors.
Crenshaw argued Thursday that the proposed agreement “undermines the court’s order.”
“If … Ripple decides tomorrow to sell unregistered XRP tokens to institutional investors — in plain defiance of the court’s order — this Commission will do absolutely nothing about it,” Crenshaw wrote. “There will be no enforcement of the law. The hundreds of hours spent by the court in this matter will be rendered meaningless. And the court’s decision will be effectively vacated.”
The SEC, meanwhile, said its decision to settle “rests on its judgment that such resolution will facilitate the commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action.”
The SEC’s retreat from its more aggressive Biden-era stance on crypto enforcement is a major facet of the expected loosening of financial regulations under President Donald Trump. The agency, in the early days of Trump’s second term, dropped several lawsuits and enforcement actions against firms such as Robinhood, Coinbase, Gemini and Kraken.
The whiplash appears all too abrupt for Crenshaw.
“In remodeling our legal stance in this area, we have pointed to a new ‘regulatory path’ that the agency will purportedly pursue based on the work of the SEC’s Crypto Task Force,” Crenshaw wrote. “But, even if the Crypto Task Force re-writes registration rules for crypto securities in the future, that does not somehow alter the rules that were in place at the time that Ripple violated them.
“Further, we have no hint of what those future rules might look like or how long it will take to put them in place — if ever,” Crenshaw continued. “So, we are today accepting a diluted settlement that erases the investor protections we already won, based on a non-existent framework that may or may not come to fruition potentially years from now, on the basis that the current framework in place — of applying the facts to the law — was not industry or innovation-friendly. This creates a regulatory vacuum with no end in sight.”
Crenshaw’s term as SEC commissioner officially ended in June 2024. But she may stay in her role for up to 18 months after her term expires – December 2025, in her case – if no successor is confirmed.
Trump appointed Crenshaw to a seat on the five-member bipartisan panel in 2020. She was later renominated by then-President Joe Biden – a nod that was blocked by the Senate — presumably over Crenshaw’s position on crypto. A planned vote on her reappointment was canceled in December.
