Ripple Settles With SEC, Pays $50M Fine, Resumes Institutional XRP Sales

Ripple, a prominent payments firm, has reached a settlement with the U.S. Securities and Exchange Commission (SEC) in a long-running legal dispute. The agreement involves Ripple paying a $50 million fine and dropping its cross-appeal in the case. In return, the SEC will lift an injunction that prohibited Ripple from selling its cryptocurrency, XRP, to institutional investors.

The settlement marks a significant development in the ongoing legal battle, which began in December 2020. The SEC had initially imposed a $125 million fine on Ripple, but as part of the settlement, the regulator has agreed to accept a reduced amount. The remaining $75 million of the original fine, held in an interest-bearing escrow account, will be returned to Ripple. The terms of the agreement are subject to final Commission approval, court documentation, and standard judicial procedures.

The case was in the appeal phase after Judge Analisa Torres ruled that while XRP sales to retail investors on exchanges did not violate securities laws, institutional sales did meet the criteria for investment contracts under the Howey Test. The judgment imposed financial penalties and a permanent injunction barring further institutional sales of XRP. The market considered the court’s partial ruling important, as it clarified that not all crypto asset sales automatically constitute securities transactions. Additionally, it introduced important legal nuance into ongoing debates about regulatory jurisdiction in the U.S.

Ripple's chief legal officer, Stuart Alderoty, described the agreement as likely the final update on the dispute. The firm had maintained that accepting the prohibition could be interpreted as admitting wrongdoing, a position it sought to avoid given the broader implications for its operations and future fundraising efforts. The firm argued that if the SEC, under new leadership, is reassessing the appropriateness of past crypto enforcement actions in favor of clearer regulation, then penalties imposed under prior interpretations should also be reconsidered.

Legal analyst James Murphy, also known as MetaLawMan, previously speculated that the SEC would have accepted the original $125 million fine without further litigation. However, he assessed that Ripple appeared unwilling to concede to terms it viewed as inconsistent with evolving regulatory policy. The firm argued that if the SEC, under new leadership, is reassessing the appropriateness of past crypto enforcement actions in favor of clearer regulation, then penalties imposed under prior interpretations should also be reconsidered.

Additionally, different reports suggested that the SEC was examining whether XRP could be viewed more like a commodity than a security. The agency was allegedly comparing XRP’s profile to Ethereum (ETH). The resolution of this case is significant for the cryptocurrency industry, as it provides clarity on the regulatory treatment of digital assets. The SEC's enforcement action against Ripple centered around allegations of unregistered institutional token sales. The settlement suggests that the SEC is open to negotiating fines and penalties in cases where companies are willing to cooperate and resolve disputes without prolonged litigation.