Ripple and SEC Reach $50M Settlement, Ending Four-Year XRP Legal Battle

On May 8, 2025, Ripple Labs and the U.S. Securities and Exchange Commission (SEC) finalized a settlement, ending a legal dispute initiated in December 2020 over XRP sales. The agreement lowers a $125 million civil penalty to $50 million, with the remaining escrow funds returned to Ripple. Both parties have requested the court to lift an injunction on Ripple’s operations. The settlement preserves prior court rulings and reflects a broader shift in U.S. crypto regulation under the Trump administration, though some SEC commissioners warn of potential regulatory gaps.

Details of the Ripple-SEC Settlement

The settlement requires Ripple to pay $50 million to resolve claims of unregistered securities sales to institutional investors, down from the $125 million fine set in August 2024. The remaining $75 million in escrow will be returned to Ripple, and both sides have asked to remove a standard injunction limiting certain Ripple activities. The agreement does not alter the July 2023 ruling by Judge Analisa Torres that XRP’s programmatic sales on public exchanges did not constitute securities, but direct sales to institutional investors did.

Timeline of the Ripple-SEC Legal Dispute

The dispute began in December 2020, when the SEC filed a lawsuit against Ripple and executives Brad Garlinghouse and Christian Larsen, alleging that $1.3 billion in XRP sales to retail and institutional investors constituted an unregistered securities offering. The SEC claimed XRP met the Howey Test for investment contracts, requiring registration. Ripple argued that XRP is a digital currency used for cross-border payments, not a security, and cited prior SEC statements to support its position.

In July 2023, Judge Analisa Torres ruled that XRP programmatic sales on public exchanges did not constitute securities, as retail buyers lacked a direct relationship with Ripple or an expectation of profit tied to its efforts. However, she found that $728 million in institutional XRP sales violated securities laws, resulting in a $125 million penalty. The SEC appealed the non-security ruling for programmatic sales, while Ripple appealed the institutional sales penalty.

In March 2025, Ripple and the SEC reached a preliminary settlement. Ripple agreed to pay a $50 million fine, significantly lower than the SEC's initial demand of $125 million, with the remaining funds to be returned to Ripple from escrow accounts. Additionally, the SEC agreed to request the court to lift the standard injunction against Ripple, allowing it to resume sales to institutional investors. The Second Circuit Court of Appeals paused the case in April 2025, instructing the SEC to provide a status update within 60 days, leading to the final settlement on May 8.

Implications for Ripple and U.S. Crypto Regulation

The settlement enables Ripple to expand its U.S. operations, particularly its cross-border payment solutions, with reduced regulatory uncertainty. In the first quarter of 2025, Ripple maintained strong growth momentum. In addition to reaching a settlement with the SEC, Ripple acquired Hidden Road, a prime brokerage firm, for $1.25 billion. Hidden Road holds a broker-dealer license from the Financial Industry Regulatory Authority (FINRA). This acquisition enhances Ripple’s ability to offer fixed-income prime brokerage services to institutional clients, underscoring its ambition and strategy to integrate digital assets with traditional financial markets and expand its offerings.

Under President Trump’s administration, the SEC, led by incoming Chair Paul Atkins, has adopted a less aggressive stance toward crypto, reversing former Chair Gary Gensler’s enforcement-heavy approach. Since January 2025, the SEC has dismissed lawsuits against Coinbase, Kraken, and Consensys, and terminated investigations into Gemini, Uniswap Labs, Yuga Labs, and OpenSea.

However, there are also controversies about the settlement. According to Cointelegraph, SEC Commissioner Jaime Lizárraga opposed the Ripple settlement, arguing it undermines investor protections. In a statement, Lizárraga expressed concern that dismissing enforcement actions against Ripple and other crypto firms without addressing securities law violations creates a “regulatory vacuum” that could expose retail investors to fraud and market manipulation. As a staunch advocate for robust enforcement, Lizárraga aligned with Gensler’s view that most digital tokens, including XRP, are securities, and emphasized the need for intermediaries to register with the SEC. He argued that the settlement fails to ensure transparency and accountability, potentially weakening trust in U.S. capital markets, especially for working families. “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,” Lizárraga criticized, “In the meantime, the settlement joins a line of dismissals that collectively erode the credibility of our lawyers in court who are being asked to take legal positions today contrary to the ones taken just months ago.”