Ripple Drops Cross-Appeal in SEC Case, Bringing 4-Year Legal Saga Over XRP Token Sales to an End

Key Takeaways:

• Ripple files to stop its cross-appeal in its headline-grabbing case against the U.S. SEC; the regulator will likely do the same.
• The legal status of XRP has not changed, it is still not a security for secondary market sales.
• Ripple will pay the original $125 million civil penalty, while the permanent injunction is likely to remain.

In a surprising twist to one of the crypto industry’s most closely watched legal battles, Ripple Labs will withdraw its cross-appeal against the U.S. Securities and Exchange Commission (SEC). This is an indication that the case, nearly five years old, has finally come near to resolution. The S.E.C., too, is likely to withdraw its own appeal, bringing to a close a major chapter in the battle over how digital assets ought to be regulated in the United States.

Read More: Ripple’s $125M Crypto Clash With SEC Paused Again — Massive XRP Shake-Up by August 15?

Ripple Ends Legal Dispute After Judge Rejects Second Settlement Attempt

Ripple’s decision to withdraw comes shortly after U.S. District Judge Analisa Torres rejected a second joint motion by Ripple and the SEC. The motion had sought to lower Ripple’s civil penalty from $125 million to $50 million and eliminate the permanent injunction previously imposed by the court.

Judge Torres made it clear she wasn’t convinced by the attempt to dissolve the injunction. In her decision, she emphasized that Ripple had not demonstrated a change in circumstances since the injunction was first issued. She wrote, “When the Court imposed the injunction, it did so because it found a ‘reasonable probability’ that Ripple would continue violating federal securities laws. This has not changed.”

This rejection left Ripple with two options: press forward with an appeal against the court’s ruling on institutional sales or accept the penalty and move on. CEO Brad Garlinghouse confirmed on X (formerly Twitter) that the company has chosen the latter. “We’re closing this chapter once and for all,” he wrote.

Ripple Accepts $125 Million Fine and Keeps Focus on “Internet of Value”

By dropping its appeal, Ripple has accepted the $125 million fine originally imposed by the court—far less than the SEC’s initial demand of $2 billion. Ripple had earlier argued that the outcome represented a 94% reduction in potential penalties and thus a win for the company.

More importantly, Ripple will continue operating under a permanent injunction, which requires it to comply with securities laws in future institutional sales of XRP. However, XRP’s non-security status in secondary market transactions remains intact, a key victory for the crypto industry and token holders.

Chief Legal Officer Stuart Alderoty explained the company’s rationale: “The Court gave us two options: dismiss our appeal challenging the finding on historic institutional sales—or press forward. Either way, XRP’s legal status as not a security remains unchanged. In the meantime, it’s business as usual.”

Garlinghouse echoed this sentiment, signaling a return to core business activities. “Our focus now is on building the Internet of Value,” he said, referencing Ripple’s long-standing mission to use blockchain to power global money transfers.

Timeline of the SEC vs. Ripple Case

The suit was initially filed in December 2020 when the SEC under then-chair Jay Clayton accused Ripple of an unregistered securities offering because it sold $1.3 billion of XRP. The case listed Brad Garlinghouse, the CEO, and Chris Larsen, the executive chairman, as defendants.

In July 2023, Judge Torres granted a partial summary judgment. She determined that XRP sales on public exchanges were not securities transactions, a precedent-setting moment in the world of cryptos. But, she determined, XRP sales to institutional investors were in violation of securities laws, and that’s what has led to the current civil penalty and injunction.

The decision went a long way toward providing clarification around the legal status of XRP and influenced other projects in how they structured token sales and distributions. The decision was broadly seen by market observers as a net win for the crypto industry, and especially for projects involved in retail token sales.

Read More: Ripple and SEC Push to Unlock $125M in Escrow—But Only One Side Gets Paid

What This Means for XRP and the Broader Crypto Market

After Garlinghouse broke the news, XRP experienced a slight surge by 3.36 percent in merely hours, to a price of $2.18, CoinMarketCap data indicates. The market read the move as the last leg of a long legal journey that has been a drag on both Ripple and the XRP community for years.

The SEC’s expected withdrawal from its own appeal also removes the final legal hurdle in the case. The permanent injunction, however, continues in place for Ripple’s institutional sales, but the company has indicated that it is able to live under those conditions while growing its global network of payments.

That might also have wider significance for the future direction of the SEC’s enforcement efforts, especially as the agency hunts for cases against numerous other crypto firms. The Ripple case represented one of the earliest and biggest clashes between regulators and blockchain companies over how courts would view the application of securities laws in the digital asset industry.