U.S. Securities and Exchange Commission (SEC) and Ripple Labs jointly filed to dismiss their respective appeals in the Second Circuit Court, effectively ending a nearly five-year legal battle over the classification of XRP.
The lawsuit, initiated by the SEC in December 2020, alleged that Ripple conducted an unregistered securities offering through XRP sales. A key ruling in July 2023 by Judge Analisa Torres determined that XRP sales on public exchanges did not constitute securities, though institutional sales violated securities laws, resulting in a $125 million fine for Ripple and a permanent injunction on future institutional sales.
The joint dismissal, filed under Federal Rule of Appellate Procedure 42(b)(1), followed an agreement-in-principle reached in May 2025, with each party bearing its own legal costs. Ripple’s Chief Legal Officer, Stuart Alderoty, confirmed the resolution, stating the case was over and Ripple could refocus on business.
The dismissal leaves Torres’ 2023 ruling as the final judgment, providing clarity on XRP’s regulatory status and potentially influencing future crypto regulation. XRP’s price surged to $3.34, reflecting a 12.34% daily gain, driven by market optimism over the resolution.
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Implications of the SEC-Ripple Settlement
This clarity is likely to encourage exchanges like Coinbase and Binance to relist or maintain XRP trading, boosting its liquidity and market adoption. The ruling may serve as a benchmark for other cryptocurrencies, potentially shielding them from being classified as securities in secondary markets, fostering innovation and reducing regulatory uncertainty.
The resolution signals a retreat from the SEC’s prior “regulation by enforcement” approach under former Chair Gary Gensler, which was criticized for stifling innovation. The settlement allows Ripple to focus on expanding its blockchain-based payment solutions, such as cross-border transactions using XRP, without ongoing legal overhang.
The precedent may embolden other crypto firms to challenge SEC enforcement actions, encouraging a more proactive industry stance against overregulation. The settlement could spur increased institutional adoption of XRP, as seen with moves like Purpose Investments’ launch of a spot XRP ETF in North America, signaling growing confidence in XRP’s regulatory status.
The reduced fine of $50 million (from $125 million) and the lifting of the injunction on institutional sales allow Ripple to redirect resources toward business development, potentially strengthening its role in global payments. The settlement may mitigate the risk of regulatory arbitrage, where firms relocate to crypto-friendly jurisdictions due to U.S. regulatory uncertainty, thus retaining innovation and capital within the U.S.
The case highlights the limitations of applying the 1946 Howey Test to modern digital assets, prompting calls for tailored regulatory frameworks. The distinction between institutional and programmatic sales could influence how other tokens are classified, potentially leading to a more nuanced regulatory approach. The resolution may pressure the SEC to provide clearer guidelines on which digital assets are securities, reducing the risk of future enforcement actions based on ambiguous criteria.
How New SEC Legislation and Policy Changes Paved the Way
The appointment of Paul Atkins as SEC Chair in January 2025, following Gary Gensler’s departure, marked a significant shift toward a pro-crypto regulatory stance. Atkins, known for criticizing regulatory uncertainty in crypto markets, prioritized accommodating digital assets within capital markets.
Atkins’ leadership introduced “Project Crypto,” an initiative to modernize securities rules, provide clear guidelines on when tokens are securities, and offer exemptions for crypto issuers and intermediaries. This policy shift likely encouraged the SEC to negotiate a settlement rather than pursue a potentially unfavorable appeal outcome.
The establishment of the SEC’s Crypto Task Force, led by Commissioner Hester M. Peirce, aimed to clarify the application of securities laws to crypto assets and recommend policies fostering innovation while protecting investors. The task force’s focus on distinguishing securities from non-securities aligned with the Ripple ruling’s emphasis on programmatic sales, likely influencing the SEC’s decision to drop its appeal.
The Trump administration’s pro-crypto stance, including President Trump’s pledge to be a “crypto president” and the White House’s call for the SEC and CFTC to enable digital asset trading, pressured the SEC to resolve high-profile cases like Ripple’s. The Financial Innovation and Technology for the 21st Century Act (FIT21), passed by the House in May 2024, proposed clearer jurisdictional boundaries between the SEC and CFTC.
Although not yet law, FIT21’s bipartisan support signaled a legislative push for regulatory clarity, likely influencing the SEC’s willingness to settle rather than risk a precedent-setting appellate loss. Political pressure from lawmakers and industry groups, who criticized the SEC’s aggressive enforcement as stifling innovation, further encouraged a resolution.
The SEC-Ripple settlement marks a pivotal moment for U.S. crypto regulation, providing clarity that XRP’s programmatic sales are not securities and setting a precedent for other digital assets. This outcome supports innovation, boosts market confidence, and may encourage broader adoption of cryptocurrencies. The resolution was facilitated by a pro-crypto shift under SEC Chair Paul Atkins, the Crypto Task Force’s focus on clear regulations.