The U.S. Securities and Exchange Commission has settled with Ripple Labs, Inc., returning over $75 million in escrowed funds and lifting a court-issued injunction from a 2020 lawsuit over unregistered securities sales. The decision has prompted internal dissent, with one commissioner warning that the move weakens investor protections and undermines the court’s authority.
Background and Court Ruling
The SEC originally sued Ripple in December 2020, alleging the company raised capital through unregistered sales of its cryptocurrency token, XRP. A federal court later ruled that Ripple’s institutional sales of XRP violated Section 5 of the Securities Act of 1933, though other secondary market transactions did not fall under that violation.
The court imposed a permanent injunction on Ripple and levied a civil penalty exceeding $125 million. Both Ripple and the SEC appealed parts of the ruling. On Friday, the SEC announced that it would settle the case, allowing Ripple to reclaim more than $75 million currently held in escrow. As part of the agreement, the court’s injunction barring future violations was vacated.
Commissioner Voices Strong Dissent
SEC Commissioner Caroline A. Crenshaw issued a formal dissent against the settlement, arguing it undercuts the authority of the judiciary and damages the agency’s enforcement credibility. The commissioner emphasised that the agreement effectively nullifies penalties without changing the court’s findings, opening the door for Ripple to resume activities the court deemed illegal.
The commissioner also expressed concern over a perceived shift within the SEC away from enforcing existing securities laws in the crypto sector, replacing established standards with a still-undefined regulatory framework. The dissent noted that ongoing dismissals of similar cases risk damaging the agency’s legal consistency and the credibility of its attorneys.
Uncertainty for Investors and Markets
The settlement raises broader questions about the SEC’s direction on cryptocurrency enforcement. Critics argue that undoing enforcement outcomes without a clear replacement policy leaves a gap in investor protections. It also introduces ambiguity about how market participants should interpret prior legal decisions.
The dissenting commissioner questioned whether the resolution aligns with the agency’s mission to protect investors, warning that it could send conflicting signals about the SEC’s stance on digital asset regulation.
As the appeals process continues, the impact of the settlement on future enforcement actions remains uncertain. The case highlights ongoing tensions within the SEC over how to regulate a rapidly evolving crypto landscape.
