SEC and Ripple File Final Settlement in XRP Case—Now All Eyes on Judge Torres

The U.S. Securities and Exchange Commission (SEC) published a Litigation Release on May 8 announcing a settlement agreement with Ripple Labs Inc., CEO Brad Garlinghouse, and co-founder Chris Larsen to resolve its long-running civil enforcement case.

The U.S. Securities and Exchange Commission (SEC) has filed a final settlement agreement with Ripple in their ongoing legal battle, signaling a pivotal moment that could finally unleash XRP’s momentum and reshape crypto regulation forever.

The apex court today announced a pending settlement to resolve its civil enforcement case against Ripple Labs Inc., CEO Brad Garlinghouse, and co-founder Chris Larsen for allegedly selling XRP tokens in an unregistered securities offering.

The joint filing requests an indication from the court on whether it would ultimately dissolve a previously issued injunction and unlock escrowed penalty funds.

Out of the $125,035,150 held in escrow under the court’s Aug. 7, 2024, final judgment, $50 million would go to the SEC and the remaining balance would be returned to Ripple.

This arrangement would proceed only if the court provides an indication that it would dissolve the injunction and permit the release of funds.

If such a ruling is made, both the SEC and Ripple intend to seek a limited remand to the district court so it can formally issue the requested relief. Once granted, both parties would move to terminate their ongoing appeals before the U.S. Court of Appeals for the Second Circuit.

The SEC stated that the settlement reflects its strategic regulatory goals rather than an assessment of the lawsuit’s merits.

“The Commission’s decision to exercise its discretion and seek a resolution of this pending enforcement action rests on its judgment that such resolution will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action,” the agency said.

It further clarified, “The Commission’s decision to resolve this enforcement action does not necessarily reflect the Commission’s position on any other case.”

While the SEC has officially announced the settlement with Ripple in a Litigation Release, members of the crypto industry had already anticipated this move after Garlinghouse disclosed the agency’s plan to drop the case over XRP sales on social media.

Since Gary Gensler’s departure from the SEC in January, the agency has taken a more crypto-friendly turn under new Chair Paul Atkins. It has paused or dropped several pending enforcement actions against crypto firms and launched public roundtables to engage with the industry.

This marks a shift from Gensler’s approach of aggressive regulation by enforcement to one focused on clear and innovation-friendly regulation.

Attorney James K. Filan, a prominent legal analyst who has been closely following the SEC’s lawsuit against Ripple over XRP, shared this significant update on the social media platform X, stating, “The SEC has filed the Settlement Agreement Letter.”

He further broke down the procedural roadmap, explaining the sequential steps that must occur before the case is officially over.

First, U.S. District Judge Analisa Torres must issue an indication of whether she would dissolve the injunction and approve the release of the escrowed funds, allocating $50 million to the SEC and the remainder to Ripple.

If Judge Torres indicates that she would grant that relief, the parties will then jointly request the Second Circuit to return the case to her courtroom for limited action.

Upon the remand being granted, the SEC and Ripple would file a motion formally requesting the relief they seek.

Filan concluded, “After the injunction is dissolved and the funds distributed, the SEC and Ripple will ask the Court of Appeals to dismiss the SEC’s appeal and Ripple’s cross-appeal. Then it will be over.”