A federal judge, for the second time, has shot down a request from the Securities and Exchange Commission and cryptocurrency firm Ripple that the latter’s penalty be reduced.
“The SEC, like any other law enforcement agency, has discretion to change course after an enforcement action is initiated,” Judge Analisa Torres of the U.S. District Court for the Southern District of New York wrote Thursday. “But the parties do not have the authority to agree not to be bound by a court’s final judgment that a party violated an Act of Congress in such a manner that a permanent injunction and a civil penalty were necessary to prevent that party from violating the law again.”
The SEC sued Ripple in December 2020, alleging the company’s token, XRP, is a security. After a court battle that spanned more than half of the Biden administration, Torres ruled that XRP counts as a security only when it’s sold to institutional investors – not to the general public. Torres handed Ripple a $125 million penalty last year. However, the SEC, under new management by the Trump administration, asked Torres in May to dissolve her injunction so that $75 million of that penalty could be returned to Ripple.
Torres refused, noting that the request should have cited Rule 60, which demands the parties demonstrate “exceptional circumstances.”
Ripple and the SEC cited that rule in their follow-up, but Torres asserted that the Supreme Court has held firm that the judgment of a court is “not merely the property of private litigants.”
“It is a final judgment that belongs ‘to the legal community as a whole’ and ‘should stand unless a court concludes that the public interest would be served by a vacatur,’” Torres wrote Thursday.
Torres suggested the SEC and Ripple appeal her injunction, or withdraw their appeals of her previous ruling, which are pending before the 2nd Circuit.
“Neither option involves requiring this Court to absolve Ripple of its obligations under the law,” Torres wrote Thursday.
Ripple CEO Brad Garlinghouse indicated Friday, in a post on X, that the company “is dropping [its] cross appeal, and the SEC is expected to drop their appeal, as they’ve previously said.”
“We’re closing this chapter once and for all, and focusing on what’s most important – building the Internet of Value,” Garlinghouse wrote.
In a separate X post, Stu Alderoty, Ripple’s chief legal officer, wrote that the court “gave us two options.”
“Either way, XRP’s legal status as not a security remains unchanged,” Alderoty wrote Thursday. “The ball is back in our court.”
A spokesperson for the SEC had no immediate comment.
The SEC and Ripple cited a change in agency policy as a reason for the request, Torres wrote Thursday. The SEC “launched a crypto task force dedicated to helping the [agency] further develop the regulatory framework for crypto assets,” Torres noted. In its request, the agency also named four crypto-related enforcement actions it has dismissed by joint stipulation and said a lighter touch toward Ripple would be “consistent.”
Torres, however, said she was “not persuaded.”
“Ripple’s conduct was so egregious,” Torres said of the SEC’s court filings between 2020 and 2023, “that the Agency ‘fully expect[ed]’ Ripple” to continue hiding information that was required to be disclosed for the benefit of investors.
“In other words, all signs pointed to the likelihood that, without an injunction, Ripple would continue to disregard the laws of Congress,” Torres wrote Thursday. “None of this has changed — and the parties hardly pretend that it has. Nevertheless, they now claim that it is in the public interest to cut the Civil Penalty by sixty percent and vacate the permanent injunction entered less than a year ago.”
