A crypto-skeptical U.S. Securities and Exchange Commission (SEC) commissioner has recently criticized the agency regarding a settlement letter that could end the ongoing Ripple legal battle. The SEC and Ripple have submitted a joint letter to a New York court, aiming to dissolve the August 2024 injunction against Ripple and recover $75 million of the $125 million in civil penalties currently held in escrow.
SEC Commissioner Caroline Crenshaw expressed her concerns in a statement, arguing that this proposed settlement risks compromising the agency’s enforcement capabilities and undermines recent judicial rulings. “This 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,” Crenshaw remarked.
Under the previous Trump administration, the SEC began to soften its hardline approach toward crypto firms, leading to the dismissal of numerous enforcement actions. However, Crenshaw contends that if Judge Torres approves the settlement, it could dismantle vital investor protections already achieved and create a regulatory vacuum until a more comprehensive framework is established.
Reflecting on the situation, she stated, “The settlement is not in the best interests of the investors and markets that our agency is tasked with serving and protecting. It creates more questions than answers.” In August 2022, a ruling mandated Ripple to pay $125 million in penalties, concluding that the company’s XRP token was considered a security only when sold to institutional investors.
What’s Next for the Ripple Case?
While an agreement has been reached between the SEC and Ripple, legal experts note that the case isn’t over yet. Former federal prosecutor James Filan highlights that several steps remain before this legal saga can definitively conclude. Judge Torres must initially provide an indicative ruling on the settlement letter.
If Judge Torres supports the settlement, the SEC and Ripple will seek a limited remand from the Second Circuit Court of Appeals back to her, which may then prompt the filing of additional motion paperwork for the settlement acceptance. Filan indicates that following the dissolution of the injunction and the distribution of funds, both parties will likely request the Court of Appeals to dismiss the SEC’s appeal and Ripple’s cross-appeal, signaling a potential end to the matter.
The SEC’s legal action against Ripple Labs, initiated in December 2020, accused the firm of unlawfully selling its token as an unregistered security. As this case continues to unfold, the implications for regulatory practices within the cryptocurrency sector remain profound.
