Ripple Labs Inc. and the SEC have limited options to achieve a settlement in a 2020 enforcement suit that’s in limbo after a recent court decision.
Now controlled by a Trump administration appointee, the Securities and Exchange Commission wants to take less money from Ripple and toss an injunction against the blockchain infrastructure company instead of litigating cross-appeals. The problem is that there’s a final judgment in place—and the federal judge who issued it refused to play ball in a recent ruling.
Attorneys are divided on whether that decision is a serious impediment or a mere bump in the road. “If there was an easy answer for the parties, they had two weeks to file something. And they haven’t,” said Andrew Balthazor of Holland & Knight LLP. “So that says to me that this may not be as quick a fix as they possibly thought.”
“It’s a short-term hurdle,” countered Keri Axel of Waymaker LLP, who has a white-collar and enforcement defense practice. “Cases settle on appeal all the time,” she said. “The parties are going to find a way to resolution.”
What Happened
Litigated throughout President Joe Biden’s term in office, the Wall Street regulator sued Ripple during the final weeks of the first Trump administration. Trump would return to the White House with a friendlier position on crypto, framing his stance as a reversal from the policies of the Biden era.
“I pledge to the Bitcoin community that the day I take the oath of office, Joe Biden, Kamala Harris’s anti-crypto crusade, it will end,” Trump said from the campaign trail in July.
Alleging Ripple broke securities laws by selling its digital token without registering it as a security, the agency’s December 2020 lawsuit sought almost $2 billion in penalties. But the US District Court for the Southern District of New York found that the XRP token was covered by securities laws only when sold to institutional investors—a ruling hailed as a victory for the cryptocurrency industry. In August, Judge Analisa Torres ordered Ripple to pay a much smaller $125 million civil penalty.
Both sides appealed to the US Court of Appeals for the Second Circuit in October. But as the Trump administration’s more crypto-friendly SEC dropped cases and turned away from enforcement, it reached an agreement with Ripple to reduce the civil penalty to $50 million. The parties conditioned a settlement of their cross-appeals on Torres’ willingness to release money in an escrow account and to allow previously barred digital asset sales, they said in a letter to her.
Torres, a Barack Obama appointee, denied the request May 15. The parties had asked her to “absolve” Ripple of its obligation to “cease its illegal offer and sale of securities” as part of their request, she said. Those changes would require a motion for relief from a final judgment, which carries a heavy burden and is granted only for exceptional circumstances, she said.
No Rubber Stamp
Courts still have a key role in interpreting securities laws as they relate to crypto, despite the SEC’s change in position.
The Ripple order is important “in the world of the crypto reboot,” said Joshua Naftalis of Pallas Partners (US) LLP. “Judge Torres declined to rubber-stamp the SEC’s fundamental change in position as to whether XRP is a security.”
“My read is she’s implying that she wouldn’t agree to allow them to cut the deal,” even if they followed the correct procedure, he said.
“The judge is frustrated with the enforcement agency,” said Axel. “Its job is to enforce, and it put her through all the work,” she said. “Then it did a 180.”
Post-Ruling Options
The company intends to return to court with the SEC, Ripple Chief Legal Officer Stuart Alderoty said in a post on X after the ruling. A spokeswoman for Ripple referred back to that post when asked for comment, and the SEC declined to comment.
For token issuer Ripple, the money aspect of the judgment “is like the tail wagging the dog,” said Naftalis. “It’s the injunction that really matters.”
How can the parties achieve their goals? The SEC and Ripple now find themselves in an “awkward procedural posture” because “they may not feel very confident in their arguments,” said Balthazor, who has a litigation and dispute resolution practice with a focus on crypto. “If they had strong arguments and felt confident, then they would let the Second Circuit make that decision, which would have the effect of reversing the lower court’s judgment.”
A motion to change a final judgment under Federal Rule of Civil Procedure 60, as Torres outlined in her order, is an option. But among trial courts within the Second Circuit, the “catch-all” provision of that rule requires “extraordinary circumstances,” Balthazor said.
“Here it’s a change in presidential administration and a change in enforcement priorities,” and that reason may not be sufficient, he said. The “laws haven’t changed just because there is a new presidential administration or new view on how those laws should be enforced.”
But the policies have changed, Axel said. The parties can use a fairness argument under a provision of Rule 60 that allows relief from a final judgment when “applying it prospectively is no longer equitable,” she said.
The SEC could simply decide not to enforce the judgment, Balthazor said. “But that would put Ripple at some risk” if it sells XRP tokens in violation of the injunction, he said. A dissatisfied buyer could seek to enforce the injunction or rescind the contract, or state regulators might seek to enforce the ruling, he said.
One of the parties could bring a collateral suit, Axel said. Or if Torres denies a Rule 60 motion, they can appeal that, she said.
“Creative lawyers are going to revisit this problem and find another way,” she said. “Public policy favors settlement.”
The case is SEC v. Ripple Labs Inc., S.D.N.Y., No. 1:20-cv-10832, 5/15/25.
