Ripple Labs and the SEC Have Reached a Tentative Deal That Could End the Lawsuit

Ripple Labs and the U.S. Securities and Exchange Commission have reached a tentative deal that could officially end one of crypto's most high-profile legal battles.

The U.S. Securities and Exchange Commission and Ripple Labs have reached a tentative agreement that could finally close one of crypto's most public legal battles.

As part of the deal, the SEC will keep just $50 million to settle its case with Ripple and return $75 million of the $125 million fine the firm paid last year, the regulator said Wednesday. The agency’s commissioners and a federal judge must still approve the settlement.

The move comes shortly after the SEC dropped its planned appeal of a 2023 ruling by U.S. District Judge Analisa Torres.

In that decision, Torres found that some of Ripple’s sales of XRP to retail investors through exchanges did not breach securities laws, in a partial win for the firm. But she ruled that some institutional sales did cross the line, leading to the $125 million penalty.

The SEC had originally been seeking nearly $2 billion from Ripple in civil penalties, disgorgement and interest. But the court landed on a much lower figure for the case, which will now see Ripple gain a refund of 60% of that sum.

In response, Ripple has agreed to withdraw its own planned appeal of aspects of Judge Torres’s ruling, and the SEC will ask the court to lift a standard injunction that restricted Ripple’s operations.

XRP rose about 1.5% after the announcement, hitting $2.47 before pulling back. It remains up slightly over the past 24 hours, contrasting with broader market trends.

The legal battle started in December 2020 when the SEC sued Ripple for allegedly defrauding investors by selling unregistered securities in the form of XRP. The agency also claimed that Ripple’s executives misled investors about the company’s financial condition.

The case had major implications for the crypto industry, as it focused on the crucial question of which crypto tokens should be classified as securities.

The SEC’s actions were significantly scaled up under former Chair Gary Gensler, but the regulator has pulled back on cases good in Acting Chair Mark Uyeda’s tenure.

Since January, the SEC dropped multiple lawsuits against Coinbase (NASDAQ:COIN), Consensys, Kraken and other crypto firms, sparking speculation that political donations may have influenced the agency’s stance.