Ripple and SEC Finalize $50 Million Settlement, Drawing Criticism from Commissioner Crenshaw

Summary

• Ripple and the SEC have reached a proposed $50 million settlement to end their four-year legal battle, which would also dissolve a prior injunction and return $75 million of a previously held escrow to Ripple, pending court approval.

• This settlement represents a significant reduction from the SEC’s initial $2 billion demand and follows a court ruling that distinguished between Ripple’s XRP sales to institutional and retail investors, occurring amidst a perceived softening of the SEC’s crypto stance under the Trump administration.

• SEC Commissioner Caroline Crenshaw has strongly criticized the agreement, warning it undermines investor protection, the court’s previous findings, and the SEC’s credibility, potentially creating a “regulatory vacuum.”

Ripple Labs and the U.S. Securities and Exchange Commission (SEC) have arrived at a settlement agreement, which, if sanctioned by the New York Court, will conclude their protracted four-year legal confrontation.

This development has, however, drawn sharp criticism from SEC Commissioner Caroline Crenshaw, who views the agreement as detrimental to investor protections and the established legal framework.

Key Terms of the Proposed Settlement Agreement

A joint settlement letter, submitted on Thursday, outlines that both parties are formally requesting the dissolution of the August 2024 injunction previously imposed on Ripple.

Furthermore, the agreement stipulates that the blockchain payments company, along with its two principal executives, CEO Brad Garlinghouse and Executive Chairman Chris Larsen, will incur a $50 million penalty.

Consequentially, the remaining $75 million from the initially determined $125 million in civil penalties, currently held in escrow, is slated to be returned to Ripple.

The ultimate ratification of this mutually agreed-upon settlement rests with District Court Judge Analisa Torres.

Background of the Legal Dispute and Shifting Regulatory Landscape

The SEC, under the leadership of former Chair Gary Gensler—who adopted an aggressive stance against prominent cryptocurrency firms during the Biden administration—had initially sought a significantly larger penalty from Ripple, demanding a $2 billion fine.

In a ruling last year, Judge Torres mandated Ripple to pay a $125 million fine.

This penalty was imposed after the court found that Ripple had violated securities laws through its sales of the native XRP token to institutional clients, but crucially, determined that the company did not contravene federal securities laws by making XRP available on digital asset exchanges for retail investors.

Since the commencement of President Donald Trump‘s term, the SEC, operating under new leadership, has demonstrably softened its previously stringent approach towards the cryptocurrency industry, resulting in the dismissal of multiple enforcement actions and investigations.

President Trump has publicly committed to positioning the U.S. as the “crypto capital of the world.”

SEC Commissioner Crenshaw’s Public Denunciation of the Deal

SEC Commissioner Caroline Crenshaw has vocally opposed the agency’s pending agreement with Ripple.

In a statement released on May 8th, she warned that the settlement significantly impairs the regulator’s capacity to maintain oversight of cryptocurrency companies and effectively undermines the court’s previous ruling.

“This settlement, alongside the programmatic disassembly of the SEC’s crypto enforcement program, does a tremendous disservice to the investing public and undermines the court’s role in interpreting our securities laws,” Crenshaw stated.

It is noteworthy that Commissioner Crenshaw’s official term concluded in 2024; however, SEC regulations permit an 18-month extension beyond the term’s expiration.

Crenshaw further cautioned that this development harms the SEC’s credibility, asserting that the agency’s legal counsel “are being asked to take legal positions today contrary to the ones taken just months ago.”

The Commissioner also contended that if Judge Torres approved the settlement, it would effectively nullify “the investor protections we already won” and create a “regulatory vacuum” until the SEC’s crypto task force can establish a comprehensive regulatory framework.

“The settlement is not in the best interests of the investors and markets that our agency is tasked with serving and protecting.

It creates more questions than answers,” she posited.

Also Read: SEC Action Concludes With $75M Recovery for Ripple

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