Ripple, SEC Rebuffed by Judge on Bid for Settlement Path (1)

A proposed settlement between Ripple Labs Inc. and the SEC remains in limbo after a federal judge in New York on Thursday rejected their bid to alter her previous ruling requiring the cryptocurrency company to obey a federal injunction and pay $125 million.

“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,” Judge Analisa Torres of the US District Court for the Southern District of New York said, adding the latest wrinkle to the long-running case.

The SEC and Ripple reached an agreement to settle the litigation in May, stipulating that the deal would take effect only if Torres’ August 2024 order was struck down and the penalty was reduced by more than half.

The SEC has already taken steps to settle or otherwise drop crypto-related enforcement actions left over from the Biden administration.

Despite the agency’s welcoming posture toward the crypto industry, Ripple remains on the hook for Torres’ injunction, which came as part of an enforcement action launched during the first Trump administration.

Security or Not?

The SEC in December 2020 alleged that the company illegally sold its XRP digital token without registering it as a security. Torres held in July 2023 that the token was covered by securities laws only when sold to institutional investors—a ruling hailed as a victory for the cryptocurrency industry.

In August 2024, the judge barred Ripple from committing further securities law violations and imposed the civil penalty, but denied an SEC bid to disgorge Ripple’s profits from sales.

SEC and Ripple both appealed aspects of the judgment in October.

“With this, the ball is back in our court,” Ripple’s chief legal officer, Stuart Alderoty, posted on X in response to Torres’ latest order. “The Court gave us two options: dismiss our appeal challenging the finding on historic institutional sales—or press forward with the appeal. Stay tuned.”

The SEC declined to comment.

Shifts in policy were the SEC’s main rationale for the court to vacate its previous order and reduce the penalty, the judge said. She said she was unconvinced by the agency touting its crypto task force and dismissals of similar enforcement actions.

“If the parties genuinely wish to end this litigation today, they are free to withdraw their appeals,” she said.

Torres suggested an appeal as the proper avenue to challenge her August order, rather than expecting her to absolve Ripple of its legal obligations.

Neither dropping the appeals nor following through with them “involves requiring this Court to absolve Ripple of its obligations under the law,” she said.

Debevoise & Plimpton LLP and Kellogg, Hansen, Todd, Figel & Frederick PLLC represent Ripple.

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