In a pivotal development for one of the most closely watched legal battles in the cryptocurrency space, a U.S. federal judge has rejected a joint proposal by Ripple Labs and the Securities and Exchange Commission (SEC) to settle outstanding penalties in the long-running XRP litigation. The decision marks a procedural setback but does not alter the broader trajectory of the case, which continues to shape the regulatory landscape for digital assets in the United States.
Court Denies Settlement Motion on Procedural Grounds
U.S. District Judge Analisa Torres, who has overseen the Ripple-SEC case since its inception in 2020, ruled on Thursday that the proposed $500,000 settlement was "procedurally improper" and beyond the court’s current jurisdiction. The case is currently under appeal at the Second Circuit Court of Appeals, which has stripped the lower court of authority to take further action.
The rejected motion sought to reduce Ripple’s potential penalty from $1.3 billion—originally tied to unregistered XRP sales—to just $500,000. It also aimed to lift an injunction imposed in April 2024 that restricted certain activities related to XRP distribution. Both parties had agreed to the deal and requested an “indicative ruling,” a legal mechanism meant to signal how the district court would rule if the case were remanded back from the appellate level.
However, Judge Torres declined to issue such a ruling, stating that even if jurisdiction were restored, she would still deny the motion due to procedural deficiencies. She emphasized that the parties failed to meet the stringent legal standards required to modify a final judgment under Federal Rule of Civil Procedure 60(b), which reserves such relief for "exceptional circumstances."
“The court finds that the parties have not demonstrated extraordinary circumstances warranting relief,” Judge Torres wrote in her opinion.
This technical rejection underscores the complexity of navigating post-trial procedures in high-stakes litigation, especially when appeals are pending.
Ripple Maintains Confidence Despite Setback
Despite the procedural blow, Ripple remains optimistic about its position. Stuart Alderoty, Ripple’s Chief Legal Officer, downplayed the ruling on social media, asserting that “today’s order changes nothing about Ripple’s victory.” He confirmed that both Ripple and the SEC intend to return to the appellate court to seek a remand—essentially asking for the case to be sent back to the district court—so they can finalize their settlement agreement.
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This coordinated effort suggests continued cooperation between Ripple and the SEC, signaling a potential shift toward resolution after years of adversarial proceedings.
Background: The Origins of the XRP Lawsuit
The legal dispute dates back to December 2020, when the SEC filed a lawsuit against Ripple Labs, alleging that the company raised over $1.3 billion through unregistered sales of XRP tokens. The SEC argued that XRP qualifies as a security under U.S. law, making its distribution subject to federal securities regulations.
Ripple countered that XRP functions more like a currency or commodity—not a security—and therefore should not fall under traditional securities frameworks. The case quickly became a flashpoint in the broader debate over how digital assets should be regulated in the U.S., with implications extending far beyond Ripple itself.
In July 2023, Judge Torres issued a partial summary judgment that was widely seen as a win for Ripple. She ruled that XRP itself is not inherently a security, particularly when sold on public exchanges or used for payments. However, she also found that institutional sales of XRP did constitute unregistered securities offerings, creating a nuanced precedent that balanced innovation with investor protection.
Shifting Regulatory Landscape Under New Leadership
The current phase of the case unfolds amid evolving attitudes within U.S. financial regulators. With new leadership at the SEC under the Trump administration's appointees, there has been a noticeable softening in enforcement posture toward digital asset firms.
Recent actions include dropping charges against major platforms like Coinbase and Kraken in similar securities disputes. These developments suggest a growing recognition that rigid application of century-old securities laws may hinder technological progress and U.S. competitiveness in global fintech markets.
This regulatory recalibration strengthens Ripple’s argument for a pragmatic resolution—one that acknowledges compliance concerns without stifling blockchain innovation.
Market Reaction: XRP Price Dips Amid Legal Uncertainty
News of the rejected settlement triggered a short-term market reaction. XRP price dropped approximately 6% following the announcement, trading around $2.38 at the time of writing. While volatility is common in crypto markets around legal headlines, analysts note that long-term sentiment remains cautiously positive given the ongoing cooperation between Ripple and regulators.
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What’s Next? Path Forward for Ripple and SEC
Both Ripple and the SEC have publicly stated their commitment to resolving the matter. Their next step involves petitioning the Second Circuit Court of Appeals to remand the case back to Judge Torres’ courtroom. Once jurisdiction is restored, they can resubmit their settlement for formal approval.
If successful, this path could bring finality to a case that has spanned nearly five years—offering much-needed clarity for developers, investors, and other blockchain companies operating in uncertain regulatory territory.
Frequently Asked Questions (FAQ)
Q: Why did the judge reject the $500K settlement?
A: The judge rejected it because the district court currently lacks jurisdiction while the case is on appeal. Additionally, the request didn’t meet strict legal requirements for modifying a final judgment under Rule 60(b).
Q: Does this mean Ripple lost another round?
A: No. This was a procedural denial, not a ruling on the merits. Ripple maintains its prior legal victories, including the landmark decision that XRP is not inherently a security.
Q: Could this delay the end of the lawsuit?
A: Yes, slightly. The process of seeking remand from the appeals court will take time, but both parties are aligned on resolving the case efficiently.
Q: Is XRP considered a security in the U.S.?
A: Not categorically. Judge Torres ruled that retail sales and exchange trading of XRP do not constitute securities offerings, though institutional sales did violate registration rules.
Q: What are the broader implications for crypto regulation?
A: The case sets important precedent for how token sales are evaluated—focusing on context rather than treating all digital assets as securities by default.
Q: Will Ripple face a large fine?
A: The original penalty was over $1 billion, but both sides agree on reducing it to $500K. Final approval depends on successful remand and court acceptance of the revised terms.
The Ripple-SEC saga continues to influence how digital assets are governed in America. As courts and regulators adapt to rapid technological change, cases like this help define the boundaries between innovation and compliance.
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With cooperative efforts underway and regulatory winds shifting, stakeholders across the crypto ecosystem watch closely—for signs of resolution, clarity, and opportunity.
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