Ripple hails a new major win against the SEC—but a looming appeal means the celebration may be premature (2024)

On Wednesday, Judge Analisa Torres brought the first chapter of a major Securities and Exchange Commission crypto case to a close, imposing a $125 million penalty on the digital assets firm Ripple and forbidding the company from violating securities law in the future. The penalty fell fall short of the $2 billion the SEC had sought, causing XRP—the token closely tied to Ripple—to soar more than 20%.

The SEC v. Ripple case, which began in late 2020, has been viewed as a bellwether for how courts will rule on a broader anti-crypto enforcement campaign by the agency—a campaign the industry claims exceeds the SEC’s legal authority. In response to Wednesday’s ruling, Ripple executives and other crypto watchers framed the decision as a victory for crypto firms. In the bigger picture, though, an almost certain SEC appeal—alongside the vague language of the ruling—means that long-awaited regulatory clarity is still a distant dream.

“The immediate decision by Judge Torres on balance is very positive for Ripple,” said Joe Castelluccio, a partner at Mayer Brown and the co-leader of the law firm’s fintech and blockchain practice groups, adding that the decision should still “give the industry and the market a bit of pause.”

The XRP army

Since its founding in 2012, Ripple has carved out a prominent position in the crypto sector through its promise of building a global payments network and its proprietary token, XRP, which has gained a fiercely loyal follower base and an enviable $35 billion market cap. Along with the financial success, Ripple has faced a series of legal challenges, including the 2020 lawsuit filed by the SEC under then-chair Jay Clayton.

Clayton’s successor Gary Gensler inherited the case, which quickly became the agency’s flagship litigation as it pursued a bruising enforcement campaign against the volatile industry. The SEC argued that the company had violated the law by raising over $1.3 billion through an unregistered digital asset securities offering.

After a high-profile court battle, which included the unveiling of internal SEC emails detailing the inner workings of its approach to crypto, Torres issued a surprising decision in July 2023. She found that Ripple’s sales of XRP directly to institutional investors such as hedge funds violated securities laws, but secondary sales of the token on platforms such as exchanges did not. Ripple—and most of the industry—hailed the ruling as a victory, even as the SEC filed to immediately appeal the decision pending a final judgment.

In the time between Torres’s initial decision and her ruling on Wednesday about damages, several other federal judges—including two in Torres’s own district court—have weighed in with crypto-related rulings of their own. These decisions have come to separate and sometimes contradictory conclusions than what Torres found—meaning the legal status of digital token sales has become a ripe legal question for appeals courts, and potentially for the Supreme Court.

A penalty and an injunction

While it is common for government attorneys to ask for greater penalties than are ultimately enforced, Torres’s final figure of $125 million is much closer to Ripple’s ask than what the SEC requested.

“Anyone is going to spin things their own way, but it’s hard not to see it as a win for Ripple,” said a former SEC attorney now working in crypto law, who spoke with Fortune on the condition of anonymity because of their continued work with the agency. They pointed specifically to the fact that the judge denied the SEC’s request for disgorgements from Ripple, meaning the company would not have to pay back any profits it had earned from illegal behavior.

Despite the financial win, Torres also imposed an injunction against Ripple, ordering the company to refrain from further violations of securities laws. In her decision, she points to Ripple’s “willingness to push the boundaries” of the law after the SEC filed its initial lawsuit, arguing that there is a likelihood the company “will eventually (if it has not already) cross the line.”

Because Torres declined to specifically name whether—and how—Ripple had continued to violate securities laws, the question of when digital token sales constitute securities offerings will remain open. “That points to continued guardrails around conduct in the market, and also the fact that this remains an unsettled area of the law,” said Castelluccio.

Even if Torres had been more firm in her language, it would be unlikely to impact the behavior of other companies, given the ongoing litigation by the SEC against crypto firms like Coinbase and Binance. Moreover, because other federal judges have sharply deviated from Torres’s decision—with two in the Southern District of New York finding that secondary sales could also violate securities laws—the disagreements will not be settled until the cases wind their way up to the appellate level.

Given that the SEC already tried—and failed—to file an appeal in the Ripple case before Torres’s final decision, the agency will likely again appeal the ruling, including the matter of secondary sales and the penalty. Even with the market responding positively to the decision—including XRP rallying 20% in price—Castelluccio cautioned that Torres’s decision from last July, and yesterday’s, will not have the impact of “changing the game or changing the market.”

“Those are all significant overstatements,” he added.

A final wildcard in the legal tussle over XRP and other cryptocurrencies is the slow nature of the appeals process, meaning that any higher court ruling in the Ripple case is highly unlikely before 2025 while any Supreme Court ruling would almost certainly have to wait till 2026 or later. In the meantime, the growing interest in crypto on the part of lawmakers means it is possible Congress passes new rules to govern the sector—potentially resolving the legal issues in the cases involving Ripple and Coinbase before the courts do.

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Ripple hails a new major win against the SEC—but a looming appeal means the celebration may be premature (2024)

FAQs

Did SEC appeal the Ripple case? ›

It already tried to appeal it, but because the case was still ongoing, the SEC had a higher hurdle to proceed. The judge denied it.

Has Ripple won the lawsuit? ›

Ripple secured a partial victory in July 2023, with the court ruling that only institutional sales of the XRP token, not programmatic sales to retail investors, were unregistered securities offerings.

Will XRP go up after a lawsuit? ›

Ripple's lawsuit settlement with a $125 million fine establishes XRP as a non-security in the US, boosting market confidence. XRP surged 27% post-settlement, reaching $0.64, with potential to rise to $0.97 due to improved fundamentals and favorable macroeconomic conditions.

What is the SEC fine for Ripple? ›

Aug 7 (Reuters) - Ripple Labs has been ordered by a Manhattan court judge to pay the U.S. Securities and Exchange Commission about $125 million in penalties over charges of improperly selling the cryptocurrency XRP, according to a court filing.

Why does the SEC hate Ripple? ›

Ripple is a blockchain developer and the creator of the XRP token. The SEC accused Ripple of selling XRP in an unregistered security offering. The outcome of the U.S. regulator's court case against Ripple might still have far-reaching consequences for the cryptocurrency industry.

What does the SEC want from Ripple? ›

The SEC asked for $2B, and the Court reduced their demand by ~94% recognizing that they had overplayed their hand. We respect the Court's decision and have clarity to continue growing our company. This is a victory for Ripple, the industry and the rule of law.

How high can XRP go? ›

Can XRP reach $100? Reaching a $100 price point would mean a market capitalisation of roughly $5.2 trillion for XRP, considering the current circulating supply of about 52 billion. This would be more than four times larger than the current value of all cryptocurrencies combined.

Will Ripple bounce back? ›

Despite the crash that hit the crypto market this week, a rebound is expected for a plethora of tokens. Among them is Ripple, which could surge based on a recent VanEck prediction that paves the way for XRP to reach $25. The asset has already shown signs of a bounce back.

Who is behind the XRP lawsuit? ›

The SEC initiated legal action against Ripple Labs, its CEO Brad Garlinghouse, and co-founder Chris Larsen, accusing them of conducting an unregistered securities offering.

Can XRP go up to $1000? ›

At a $1,000 price, the market would need to move 1 billion XRP tokens to account for a $1 trillion volume and 20 billion tokens for a $20 trillion volume. For XRP to clinch a $1,000 price, it would need to skyrocket by a massive 188,543% from its current value of $0.5301.

How much will XRP be worth in 2025 after lawsuit? ›

XRP Price Forecast for 2025

For 2025, XRP's price might claim a high of $3.38, potentially setting a new all-time high. In a global crisis, it might settle at $2.47, averaging $2.93.

Will XRP reach $500? ›

Can XRP Reach 500 Dollars? For XRP to achieve a price of $500, it would necessitate an increase of over 1,000 times its current value. While theoretically possible in the dynamic world of digital assets, this scenario faces significant practical hurdles.

Is the XRP case over? ›

On Wednesday, Judge Analisa Torres brought the first chapter of a major Securities and Exchange Commission crypto case to a close, imposing a $125 million penalty on the digital assets firm Ripple and forbidding the company from violating securities law in the future.

Why is Ripple banned? ›

Wednesday's order on remedies follows the judge's July 2023 ruling in the case itself, finding that Ripple violated federal securities laws through its direct sale of XRP to institutional clients, though she also ruled that Ripple's programmatic sales of XRP to retail clients through exchanges did not violate any ...

Does Ripple have a limit? ›

Unlike most cryptocurrencies, XRP is pre-mined, with a maximum token supply of 100 billion.

What is the price prediction for XRP SEC lawsuit? ›

In the best-case scenario, XRP could soar to between $16 and $20, predicated on a repeat of historical movements and broader market acceptance. The analyst writes, “If we hit another rejection at $0.72, don't panic. The breakout is inevitable, and I expect targets way above $1 latest by Q1 2025.

What is happening with Ripple? ›

Two significant developments occurred for Ripple this week; the company withdrew from the Fortress acquisition, as the inclusion of Ripple Labs in the NBG's exclusive list marked notable gains in price and volume for XRP (CRYPTO: XRP). The chairman of Softbank Group Corp. (OTC: SFTBY) spin-off SBI Holdings Ltd.

Did XRP decrease by 2.87 on Tuesday? ›

XRP declined by 2.87% on Tuesday (April 30), ending the session at $0.5006. Investor apprehension toward a court ruling in the SEC vs. Ripple case and an SEC filing influenced buyer appetite for XRP.

What is the future of XRP? ›

Our real-time XRP to USD price update shows the current Ripple price as $0.570571 USD. Our most recent Ripple price forecast indicates that its value will increase by 29.9% and reach $0.741189 by August 17, 2024.

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