Judge Rejects SEC-Ripple $50M Settlement, Case Remains Unresolved

In a significant development, a federal judge has dismissed the joint request from the U.S. Securities and Exchange Commission (SEC) and Ripple to approve their $50 million settlement, which aimed to conclude their protracted legal battle. U.S. District Court Judge Analisa Torres denied the motion, stating that even if she had jurisdiction, she would still reject it as “procedurally improper.”

Judge Torres' decision comes as a setback for both parties, who had sought an indicative ruling from the court to accept a deal that would dissolve Ripple’s injunction and reduce its fine from $125 million to $50 million. Such rulings are typically used when a case is in the appeal stage and the trial court no longer has jurisdiction. In this instance, the authority lies with the Second Circuit, where both parties filed cross-appeals following the final judgment in August 2024.

Last month, Ripple and the SEC jointly requested the Second Circuit to suspend their respective appeals after reaching an agreement-in-principle to finalize a potential settlement. However, Judge Torres noted that the parties did not address the “heavy burden” required to vacate the injunction, stating that relief from judgment under Rule of Civil Procedure 60 should only be granted in “exceptional circumstances.”

“The parties have made no effort to satisfy that burden here; their request does not even mention the Rule,” Torres said in her order. Prominent crypto lawyer Fred Rispoli observed that the parties did not request relief under the correct rule of civil procedure, suggesting that they will need to refile under the appropriate rule and potentially seek more lenient terms from the court.

The legal dispute between the SEC and Ripple dates back to late 2020, when the SEC accused Ripple of raising $1.3 billion through an unregistered securities offering of the XRP cryptocurrency. Judge Torres ruled in Ripple’s favor in July 2023, determining that institutional sales violated federal securities laws but that retail sales did not. The SEC and Ripple had previously suggested that if Judge Torres made an indicative ruling to lift the injunction against Ripple, they would jointly request a limited remand from the Second Circuit. This remand would have returned the case to the district court to enforce their mutual agreement and dismiss their cross-appeals.

Ripple’s Chief Legal Officer, Stuart Alderoty, confirmed that the company and the U.S. securities regulator remain in agreement to resolve the case and will jointly revisit the issue in court. Despite the setback, both parties are committed to finding a resolution to their legal dispute, which has been ongoing for several years. The outcome of this case will have significant implications for the cryptocurrency industry, particularly regarding the classification of digital assets as securities.