Judge Rejects SEC Ripple Settlement Proposal Over Injunction Concerns

In a significant development, a New York judge has rejected a joint request from the U.S. Securities and Exchange Commission (SEC) and Ripple Labs to approve a proposed settlement agreement. The agreement aimed to reduce Ripple’s civil penalty to $50 million and dissolve the permanent injunction against the firm. District Judge Analisa Torres of the Southern District of New York (SDNY) issued a five-page ruling on Thursday, emphasizing the necessity of maintaining the injunction due to Ripple’s past violations and potential for future violations of federal securities laws.

Judge Torres highlighted that the permanent injunction was warranted because of the substantial sums of money Ripple made by violating the law and the firm’s incentives to continue doing so. She questioned the rationale behind the parties’ request to eliminate the injunction, stating, “If the Court should not be concerned about Ripple violating the law, why do the parties want to eliminate the injunction that tells Ripple, ‘Follow the law’?”

The judge’s ruling comes amid significant changes at the SEC following the election of U.S. President Donald Trump in January and the subsequent departure of former SEC Chair Gary Gensler. Under the new leadership, the SEC has adopted a more crypto-friendly regulatory posture, creating a Crypto Task Force and dropping several investigations and litigation against crypto companies. However, Judge Torres noted that most of these cases were dismissed by the SEC before a court found a violation of federal securities laws.

This is the SEC’s second request for an indicative ruling that Judge Torres has rejected. In May, she dismissed the first attempt, citing both jurisdictional and procedural flaws. Earlier this month, the parties filed a new, expanded request, arguing that “exceptional circumstances” warranted the modification of Torres’ final judgment. Judge Torres was unmoved by these arguments, stating that the parties do not have the authority to agree not to be bound by a court’s final judgment. She emphasized that for such a modification, the parties must show exceptional circumstances that outweigh the public interest or the administration of justice, which they have not done in this case.

Judge Torres provided two alternative options for the parties if they genuinely wish to end the litigation: they can either withdraw their ongoing appeals in the case or take an appeal. Neither option involves requiring the court to absolve Ripple of its obligations under the law. This ruling underscores the court’s commitment to ensuring that Ripple adheres to federal securities laws, despite the SEC’s more lenient stance under its new leadership.