SEC Moves to Settle Ripple Lawsuit Amid Shift in Crypto Regulation Strategy

In a significant development for the crypto industry, the U.S. Securities and Exchange Commission (SEC) has taken steps to settle its long-standing legal battle with Ripple Labs Inc., signaling a broader shift in the agency’s approach to cryptocurrency enforcement.

According to a settlement proposal filed on Thursday, the SEC and Ripple are jointly requesting a federal court in Manhattan to dissolve a previously issued injunction and release over $125 million in civil penalties currently held in escrow. Under the proposed agreement, $50 million would be retained by the SEC, while the remaining funds would be returned to Ripple.

The SEC clarified that its decision to end the case stems from a strategic move to reassess and evolve its regulatory stance on digital assets. “This resolution aligns with the Commission’s efforts to modernize its oversight of the crypto sector, rather than reflecting the strength or weakness of the original claims,” the agency noted.

The legal dispute began in December 2020 when the SEC sued Ripple Labs, alleging the company violated securities laws by selling its native XRP token without registering it as a security. Initially seeking nearly $2 billion in penalties, the SEC’s pursuit was significantly scaled back after a key court ruling determined that XRP qualified as a security only in transactions involving institutional investors, a decision widely seen as a win for the crypto industry.

In August, the court ordered Ripple to pay $125 million in penalties, a substantial reduction from the original amount sought by the SEC.

However, not everyone within the agency agrees with the decision. SEC Commissioner Caroline Crenshaw voiced strong opposition to the settlement, arguing that it undermines both the judicial process and the agency’s regulatory mission. “This deal, coupled with the broader weakening of our crypto enforcement efforts, is a disservice to investors and diminishes the judiciary’s role in interpreting securities laws,” Crenshaw stated.

The move to settle with Ripple is part of a broader trend at the SEC, which has either dismissed or suspended several high-profile enforcement actions against crypto firms since the Trump administration expressed intentions to roll back regulatory crackdowns on the industry. Notably, cases against major exchanges like Coinbase and Binance have also been dropped or put on hold.

Ripple’s CEO, Brad Garlinghouse, previously disclosed that the company had spent around $150 million defending itself against the SEC’s allegations, a financial burden that underscores the intense regulatory pressure crypto firms have faced in recent years.