SEC files to settle Ripple lawsuit amid internal opposition

The U.S. Securities and Exchange Commission has filed a motion seeking court approval for a settlement with Ripple Labs, even as one SEC commissioner opposes the move over investor protection concerns.

According to the May 8 court SEC filing, both Ripple and the SEC have agreed to withdraw their respective appeals pending before the Second Circuit Court of Appeals, effectively ending a legal battle that began in December 2020. Under the proposed deal, Ripple would be able to resume sales without breaking any securities laws and recover $75 million of the $125 million that was held in escrow

The move comes after a key court ruling in 2023 by Judge Analisa Torres, who found that although sales of XRP (XRP) to public exchanges did not violate securities laws, sales to institutional investors did. If approved, the court would release the $125 million civil penalty held in escrow, with $50 million going to the SEC and the remainder back to Ripple

The settlement explicitly states that neither party will seek to amend the 2023 summary judgment, preserving the court’s finding that only institutional XRP sales violated securities law. However, not everyone within the SEC is on board

SEC Commissioner Caroline A. Crenshaw criticized the settlement as “a tremendous disservice to the investing public” in a strongly worded dissent posted on the agency’s website. She argued that it weakens the SEC’s ability to hold crypto companies accountable and sends the wrong message to the market.

Crenshaw warned that despite the court’s previous decision, the SEC may not take any action if Ripple starts selling XRP to institutions again without registering the tokens. She also expressed concern that this settlement could be part of a broader pullback in the SEC’s crypto enforcement efforts, which could leave investors less protected.

Despite this, the SEC insists the agreement is fair and serves the public interest. It pointed to the fact that the case already helped define legal boundaries around token sales, giving the crypto industry more clarity.

If the court approves the request, Ripple and the SEC will move to formally dismiss their appeals, ending one of the longest-running and most closely watched crypto cases to date. But Crenshaw’s criticism could spark new debates about how the SEC should regulate digital assets going forward.