Ripple Has Emerged (Mostly) Victorious From Its Long-Running Battle With the Securities and Exchange Commission (SEC)

Since the case didn't advance to a higher court, Judge Analisa Torres' original district court decision — which famously differentiated between XRP sales to institutional investors and those on exchanges — has not established a binding precedent.

After a four-year legal battle, the U.S. Securities and Exchange Commission (SEC) has dropped its lawsuit against Ripple. The case began in December 2019 when the SEC sued Ripple for allegedly carrying out an unregistered, $1.3 billion token offering. Throughout the case, the SEC struggled to define crypto tokens and apply existing securities laws to the rapidly evolving technology.

Despite this, the case will not be advancing to a higher court, leaving Judge Analisa Torres’s original district court decision as the final ruling. This means that her decision will not be setting a binding precedent for other cases.

While the case has now come to an end, it has left industry insiders feeling that the case could have gone further. Cases at the district court level usually get appealed to a circuit court of appeals, setting a legal precedent for that specific circuit.

However, as part of the settlement, both parties agreed to drop their appeals, meaning that Judge Torres’s original decision will not be setting a binding precedent for any specific circuit.

“The challenge is that settlements are often confidential. So we may not get that clarity industry members seek,” says Charly Ho, legal counsel at Rikka.

The case began when the SEC sued Ripple for allegedly selling XRP tokens to institutional investors without registering the offerings, a violation of Section 5 of the Securities Act of 1933. Judge Torres ruled in part of the case that these sales were indeed institutional offerings and that they should have been registered. However, she ruled that sales of XRP on exchanges were not institutional offerings and did not need to be registered.

This part of the ruling was a win for Ripple, as the SEC had argued that all sales of XRP should have been registered, no matter who the investor was. Judge Torres also ruled that the SEC failed to sufficiently notify the public about the types of tokens that would be considered securities.

Despite this ruling, the case could have continued. Both parties planned to appeal parts of the decision to the First Circuit Court of Appeals. The SEC planned to appeal Judge Torres’s ruling that it did not provide sufficient notice to the public about the types of tokens that would be considered securities.

Meanwhile, Ripple planned to appeal Judge Torres’s ruling that three sales of XRP to institutional investors should have been registered with the SEC. However, after months of legal battles, the SEC announced that it was dropping its case against Ripple.

As part of the settlement agreement, both parties agreed to drop their planned appeals. The SEC also agreed to pay a portion of Ripple’s legal fees.

“It’s a partial win for the SEC, a partial win for Ripple; and then the SEC was going to appeal the decision that was not favorable for it, and then Ripple was going to appeal the decision for the portion of the decision that was not favorable for Ripple. But because the SEC has now dropped the complaint and the claims against Ripple, part of the settlement discussions was Ripple agreeing to drop its appeal as well,” says Ho.

The case has implications for other crypto firms in the U.S., as it could have set a precedent for how token offerings should be structured and what legal weight Judge Torres’s decision really carries.

“It’s a missed opportunity insofar as legal development is concerned,” says Joshua Chu, co-chair of Hong Kong Web3 Association.

The case also comes at a time when the SEC seems to be pivoting away from the enforcement-heavy tactics that characterized the early stages of U.S. crypto regulation. In recent months, the regulator has begun to engage more closely with industry stakeholders in a bid to set clear rules of the road for the nascent sector.

This shift in strategy has been met with mixed reactions from crypto firms, some of which are still reeling from the SEC’s aggressive lawsuits.

Earlier this year, the SEC sued major crypto exchange Coinbase and smaller exchange Gemini for allegedly operating as unregistered exchanges and failing to register their token offerings. Both cases are still ongoing.

The case also has implications for the broader legal landscape, which is rapidly evolving with the introduction of new regulatory frameworks in the EU and Hong Kong. The EU’s Markets in Crypto Assets (MiCA) regulation is set to standardize the rules for crypto firms operating in the region, while Hong Kong is positioning itself as a global hub for Web3 companies.

Together, these developments suggest that the final chapter in the SEC’s case against Ripple may also mark the beginning of a new era for crypto law, one that is defined by cooperation and collaboration rather than litigation and uncertainty.

To discuss the implications of the case further, Magazine met with legal experts from across the globe: Charly Ho of Rikka in the U.S., Yuriy Brisov of Digital & Analogue Partners in Europe, and co-chair of Hong Kong Web3 Association Joshua Chu. Together, they unpack what Ripple’s “win” really means for crypto law, and whether the industry is any closer to