Ripple Labs and the SEC's Ongoing Legal Battle Has Reached a Critical Juncture

The ongoing legal battle between Ripple Labs and the U.S. SEC has reached a critical juncture.

The ongoing legal battle between Ripple Labs and the U.S. SEC has reached a critical juncture. On May 8, 2025, Judge Analisa Torres denied a joint motion from both parties seeking an indicative ruling to reduce Ripple’s $125 million penalty and release associated escrow funds.

The motion, which aimed at slashing the financial sanctions to $50 million and striking portions of the December 2023 ruling, was deemed “procedurally improper” by the court. This decision effectively stalls the proposed settlement and suggests that the case may continue on its current path.

Despite this setback, Ripple’s Chief Legal Officer, Stuart Alderoty, highlighted that the company’s previous legal victories remain intact. Notably, Judge Torres’s 2023 ruling that XRP is not a security when sold on public exchanges still stands.

A Blueprint for Blockchain in Banking

An X post by Crypto analyst SMQKE cites a William & Mary Law Review article (Vol. 66:1531) suggesting that 's institutional investors own a "slice of Ripple’s future cashflows" from its transaction settlement system.

This analysis implies that XRP could be viewed as a security, an interesting juxtaposition considering Judge Analisa Torres's 2023 ruling that XRP is not a security when sold by Ripple to the public on exchanges.

According to the analyst, a win for Ripple would be a milestone for blockchain-based infrastructure. It could provide banks, investment funds, and corporations with a blueprint for transferring critical financial functions, like payments, settlements, and custody, to blockchain networks.

If XRP is officially deemed not a security, it would validate the concept that tokens can be used to represent future corporate value without falling under strict securities laws. This, in turn, could open the door for companies to raise capital and transfer value on-chain.

Crypto Implications

SMQKE further notes that the foundations of finance are already shifting with the advent of new technologies. Tokenized shares could settle instantly, custody could be managed by smart contracts, and payment systems could be directly linked to crypto wallets.

Institutions would still play a role, but they would operate on more efficient, digital rails. If the court endorses Ripple’s structure, it would send a strong message that blockchain technology is prepared to support core financial operations.

This wouldn't just be a win for Ripple, but also a signal that the industry has matured to handle the next phase of global finance.

The SEC sued Ripple in 2020 for selling XRP as unregistered securities, a claim that Ripple denies. According to the agency, when a company sells securities, it must register the offering with the SEC or obtain an exemption.

The case has seen several partial wins for Ripple, but a final ruling is still pending. Experts say the outcome could have a huge impact on how crypto is regulated in the U.S. going forward.

Yes, a Ripple win could have huge implications for the future of crypto in the U.S.

If the court agrees with the SEC that a portion of Ripple’s Series C preferred stock offering in 2019 was sold to U.S. investors in violation of federal securities laws, it could open the door for the SEC to pursue similar claims against other crypto companies.

However, if the court sides with Ripple and rules that XRP was not a security when it was sold on the open market, it could significantly limit the SEC’s ability to police the crypto sector.

The judge’s decision could also have implications for the future of DeFi. If the court finds that crypto tokens can be sold as securities even if they are not registered with the SEC, it could make it more difficult for DeFi protocols to raise capital.

This could have a chilling effect on innovation in the crypto industry.

On the other hand, if the judge rules that crypto tokens are not securities if they are sold on a public exchange, it could create more legal certainty for the crypto industry and pave the deposits for greater institutional adoption of crypto.

The case is still ongoing and could drag on for several more years. However, the stakes are high and the implications of the judge’s decision could be far-reaching.

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