Ripple Faces Difficult Choice After Settlement Route Is Blocked

Ripple Labs Inc. and the SEC are in a tough spot after a federal judge stymied their quest to settle a securities enforcement case while it’s on appeal, leaving the company with risks either way it turns.

Judge Analisa Torres on Thursday refused for the second time their request to support lifting an injunction against Ripple and reducing a $125 million civil penalty. Instead, the blockchain company and the Securities and Exchange Commission—which have each appealed aspects of the judgment to the US Court of Appeals for the Second Circuit—were left with the limited options of dropping or fully pursuing their appeals.

If the parties drop the appeals, the injunction stays in place and Ripple won’t be able to sell its XRP token to institutional investors, attorneys told Bloomberg Law. It will also have to pay $75 million more than the SEC agreed to in the proposed settlement. But if they move forward with their appeals, they risk creating a precedent unfavorable for the crypto industry, attorneys said.

“The injunction is still a bit of a roadblock for XRP and they wanted it removed,” said Joshua Naftalis of Pallas Partners (US) LLP. Ripple wants to be relieved of the injunction so it can resume selling its XRP token to institutional investors, which the injunction prohibited, said Andrew Balthazor of Holland & Knight LLP.

The ruling is the latest development in an enforcement action that has taken an unusual course. The SEC alleged Ripple broke securities laws by selling its digital token without registering it as a security and sought almost $2 billion in penalties.

But Torres, who sits in the US District Court for the Southern District of New York, found that the XRP token was covered by securities laws only when sold to institutional investors. Torres later ordered Ripple to pay a much smaller $125 million civil penalty.

Both sides appealed in October. But as the Trump administration’s crypto-friendly SEC dropped cases and turned away from enforcement, it reached an agreement with Ripple to reduce the civil penalty to $50 million. Torres’ willingness to help extract them from parts of the judgment was a step toward settlement, they said in a letter to her.

Torres, a Barack Obama appointee, denied that first request May 15. The parties asked again unsuccessfully in June.

Options, Consequences

Which option to pick—withdrawing the appeals or following through with them—is “a really difficult question to answer,” said Balthazor.

“Dropping the appeals would leave the injunction and the penalty in place, so Ripple would have to deal with those consequences,” he said. “Pursuing the appeal potentially puts Ripple at risk of creating binding precedent across the Second Circuit on a legal ruling that Ripple and probably other members of the crypto industry would view as unfavorable.”

Even if the SEC doesn’t argue its former position in an appeal, “the Second Circuit would likely appoint someone” to make the argument instead, as courts have done in other instances where the government’s position has changed, he said.

But if there is a reversal, “that would result in a modification or removal of the injunction and a reduction or elimination of the penalty,” Balthazor said.

If Ripple drops its appeal and pays the civil penalty, it could “then determine how to best comply with the injunction while still pursuing its business goals,” he said. “Only some of Ripple’s sales were considered violating the Securities Act. So it’s possible that Ripple could thread the needle and perform its business in compliance with the injunction.”

‘Hail Mary’

The injunction isn’t “an insurmountable roadblock,” Naftalis said. “Congress can fix it or the Second Circuit can fix it.”

“The faster route is to try to get the appeals court to resolve it,” he said.

Balthazor sees waiting for Congress as “a little bit of a Hail Mary.”

“The Market Structure Reform Act is still relatively early in the drafting and negotiation process,” he said. “It doesn’t have the broader support” of other legislation addressing specific types of crypto assets, he said.

It “would provide more rules of the road with respect to selling crypto assets as securities, but it’s not as far along,” he said. “And there’s a realistic possibility that midterms could come along and change the congressional makeup that might make it even more difficult for a bill to get passed in a timely fashion.”

Another attorney still sees room for the parties to get what they want through an accord. The ruling is “just a speed bump on the way to settlement,” said Brian Klein of Waymaker LLP. “This case is going away, it’s just a question of how.”

The case is SEC v. Ripple Labs Inc., S.D.N.Y., No. 1:20-cv-10832, 6/26/25.