SEC Commissioner Slams Ripple Settlement, Urges Court Scrutiny
On Friday, May 9, 2025, Law360 reported that the U.S. Securities and Exchange Commission’s sole Democratic commissioner sharply criticized the agency’s settlement with blockchain company Ripple Labs, urging courts to closely examine the SEC’s recent shifts in cryptocurrency enforcement actions.
Commissioner Caroline Crenshaw issued a dissent following a court filing that outlined a proposed settlement to conclude the SEC’s high-profile case against Ripple Labs and its executives, Bradley Garlinghouse and Christian Larsen.
The settlement, pending approval by a New York federal judge, would resolve the SEC’s enforcement action initiated in 2020 over Ripple’s unregistered sales of its XRP token. Under the agreement, both parties would withdraw their appeals of a July 2023 summary judgment ruling. In that ruling, a New York federal judge ordered Ripple to pay a $125 million penalty for unregistered institutional sales of XRP. The settlement reduces this fine to $50 million.
In a statement, the SEC explained that the decision to settle aligns with its efforts to revise its regulatory approach to the cryptocurrency industry, rather than reflecting on the merits of the claims in the case. However, Crenshaw strongly opposed the settlement, arguing that it weakens the court’s earlier ruling, including an injunction prohibiting Ripple from future unregistered sales. She expressed concern that the deal undermines investor protections and signals a broader retreat by the SEC from its crypto enforcement efforts.
Crenshaw warned that the settlement could leave the SEC unable to act if Ripple were to resume unregistered XRP sales to institutional investors in defiance of the court’s order. She stated that the agency’s decision reflects a lack of commitment to enforcing securities laws in this context. Her dissent also called on courts to scrutinize the SEC’s recent pattern of reversing its stance on cryptocurrency-related claims.
The SEC did not provide an immediate response to requests for comment. Ripple referred to its earlier public statements about the settlement. In March, Ripple announced the terms of the agreement, noting that the SEC would abandon its appeal of parts of the 2023 ruling that determined XRP sales on public exchanges and its use as payment did not violate securities laws. In return, Ripple agreed to drop its appeal of the finding that its institutional sales required registration and to pay the reduced penalty.
The settlement marks the end of a four-year legal dispute that began when the SEC alleged Ripple’s XRP sales should have been registered as securities. Ripple’s chief legal officer, Stuart Alderoty, previously described the resolution as reinforcing the company’s victories in the 2023 ruling, particularly the determination that secondary XRP sales and its use for compensation were not securities transactions.
Crenshaw, however, argued that the settlement raises uncertainties about the legal impact of the court’s prior ruling. She criticized the agreement as part of a larger SEC trend under the current administration to scale back cryptocurrency enforcement actions. The agency has recently adjusted its crypto enforcement unit, reducing its staff and broadening its focus. Additionally, Commissioner Mark Uyeda, a former acting chair, has emphasized developing new regulations for the industry through a newly formed Crypto Task Force.
Crenshaw expressed concern that the Ripple settlement prioritizes a speculative future regulatory framework over existing investor protections. She suggested that the SEC’s decision to drop its appeal may have been motivated by a desire to avoid a Second Circuit ruling that could have upheld the agency’s earlier position that many cryptocurrency transactions should be treated as investment contracts. Such a ruling, she noted, could conflict with the SEC’s apparent shift toward dismantling its crypto enforcement program.
Source: Law360
