The U.S. Securities and Exchange Commission (SEC) has decided to drop its appeal in the ongoing legal case involving Ripple.

The SEC’s decision not to challenge the 2023 ruling by U.S. District Judge Analisa Torres brings much-needed clarity to the question of whether XRP should be classified as a security.

The U.S. Securities and Exchange Commission (SEC) has decided to drop its appeal in the ongoing legal case involving Ripple. This decision, announced on Friday, brings an end to the SEC’s attempt to overturn a 2023 ruling by U.S. District Judge Analisa Torres, who had largely ruled in favor of Ripple.

Judge’s Ruling on XRP Sales

Judge Torres had ruled that Ripple’s “programmatic sales” of XRP on secondary exchanges did not violate securities laws. However, the direct sale of XRP to institutional investors was found to be in violation of securities regulations.

With the SEC’s decision not to challenge this ruling, Judge Torres’s analysis of whether XRP should be classified as a security will stand, providing much-needed clarity on a subject that has been a point of contention since the SEC first sued Ripple in 2020.

Settlement Details: SEC Returns $75 Million

As part of the settlement, the SEC has agreed to return $75 million of the $125 million fine imposed on Ripple by a New York judge in 2022, leaving $50 million to settle the case. This settlement will also see the SEC’s injunction against Ripple lifted.

Ripple’s Future Sales to Institutional Investors

Amid the excitement over the ruling and settlement, one user on X (formerly Twitter) commented that the lifting of the SEC’s injunction would now allow Ripple to sell directly to institutional investors.

The user said that while Ripple would still need to adhere to securities laws, it would no longer be required to go through over-the-counter (OTC) desks and could sell directly to entities like hedge funds or private equity firms.

Clarification from Former SEC Attorney

However, former SEC attorney Marc Fagel clarified that while the injunction is lifted, the original ruling that Ripple’s sales to institutional investors violated the law still stands.

Fagel explained that while the SEC will no longer pursue enforcement of the case, Ripple’s sales to institutional investors may still face legal challenges under Section 5 of the Securities Act if they are conducted in a similar manner as before.

Impact on Ripple’s On-Demand Liquidity Product

When asked about the impact on Ripple’s On-Demand Liquidity (ODL) product, Fagel responded that the ruling would likely alleviate some of the restrictions Ripple faced, particularly regarding how it could sell XRP.

However, he warned that if Ripple were to resume sales in the same manner as those deemed illegal, it could still face legal issues, although the SEC would not be actively pursuing enforcement.