XRP News Today: Ripple SEC Battle: Judge Rejects Initial Settlement, Parties Seek Reduced Penalty

In a significant development in the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC), the two parties have jointly requested an indicative ruling from U.S. District Judge Analisa Torres. This motion seeks to dissolve the permanent injunction against Ripple and reduce its $125 million penalty to $50 million, potentially ending the four-and-a-half-year legal dispute. However, legal expert John Deaton, founder of CryptoLawUS, has highlighted the complexities and challenges that lie ahead in achieving this resolution.

Judge Torres' rejection of the initial joint request for a reduced fine and dissolved injunction came as a surprise to many, who had anticipated swift approval of the proposed settlement. Deaton explained that the rejection was not due to judicial resistance but rather a commitment to legal rigor. "This wasn’t a case of rubber-stamping,” Deaton said. “She threw a curveball.”

Deaton argued that the rejection was both procedural and substantive. The parties relied on inappropriate procedural grounds, and Judge Torres emphasized that exceptional circumstances—a high legal threshold—had not been adequately demonstrated. "You haven’t shown me the exceptional circumstances that would justify undoing my injunction,” Deaton paraphrased the judge’s stance. After presiding over a lengthy litigation and issuing a meticulously reasoned decision, Judge Torres was not about to casually reverse her judgment. According to Deaton, the judge essentially told both parties: “You’ve got to do some effort. You’ve got to meet this high standard.”

This high standard is rooted in the principle that final judgments can only be modified under extraordinary conditions, especially when the relief includes deterrent elements like permanent injunctions and sizable penalties. Despite his criticism of the initial brief, Deaton believes the revised joint request contains enough legal precedent to justify a favorable indicative ruling. Citing Second Circuit case law, the parties argue that a court may alter a judgment to facilitate settlement if doing so would conserve judicial resources and end appeals.

“There is enough case law cited in the SEC-Ripple brief that allows the judge to give her something to hang her hat on,” Deaton observed. A crucial point is the mutual dismissal of appeals. The SEC has already agreed to drop its challenge to the ruling on XRP’s programmatic sales, while Ripple will drop its appeal of the institutional sales ruling—but only if Judge Torres agrees to the proposed modifications. “If you don’t give us an indicative ruling… Ripple won’t drop their appeal,” Deaton explained. That means prolonging the litigation at the appellate level and potentially forcing the district court to revisit unresolved prongs of the Howey test, such as the “common enterprise” factor—something Judge Torres never fully addressed. That would tie up her courtroom with new fact-finding proceedings.

While Deaton sees a plausible legal basis for the judge to grant the motion, he criticizes how the SEC and Ripple minimized the public interest dimension of the original judgment, particularly the deterrent effect of the injunction and the $125 million penalty. “They blew the public interest,” Deaton said. “Her injunction is, ‘Ripple, you’re not allowed to violate securities laws.’ That has value.” The brief portrayed the injunction and monetary fine as having little broader significance, which Deaton believes undermines the judge’s original rationale. Moreover, he faults the parties for not citing the overwhelming public engagement in the case. “They didn’t even address that… 75,000 people knocking on the door saying they want access to this asset class,” Deaton noted. He stressed that Judge Torres had previously cited XRP holders’ affidavits in her ruling, signaling that she does care deeply about public sentiment and investor interest.

Ultimately, Deaton predicts that Judge Torres will issue the indicative ruling the parties seek, but not without conditions. “I think she’ll grant it—like by 70%,” he said. He believes the case law supporting settlement facilitation, combined with the strategic benefit of ending costly appeals, gives the judge sufficient legal cover. “The Second Circuit has ruled that saving judicial resources and ending litigation can justify modifying a judgment,” Deaton emphasized. Importantly, the case-specific nature of the injunction means Torres can approve the settlement without undermining the legal precedent she established regarding XRP’s non-security status in secondary market transactions. “Your ruling isn’t reversed,” Deaton noted. “People can still cite it… because it’s one of the first impressions related to crypto.”

This moment represents more than just the closing chapter of a long-running legal drama. It is also a litmus test for how U.S. courts will balance finality, public interest, and evolving regulatory posture in the crypto space. Whether Judge Torres grants the joint request may depend not only on the case law presented, but also on whether she believes the resolution honors both the public interest and the legal integrity of her courtroom. “She’s not just going to erase four and a half years of work,” Deaton concluded. “But if you show her the right legal basis, she’ll listen.”