Ripple Labs has been ordered to pay a $125 million fine to the Securities and Exchange Commission (SEC), a fraction of the nearly $2 billion penalty federal regulators had initially sought. This decision comes as a significant development in the ongoing legal battle between Ripple and the SEC.
Following the ruling, the price of XRP spiked by 26%, which Ripple CEO Brad Garlinghouse characterized as a ‘victory’ for the company and the crypto industry. This reaction highlights the impact of regulatory decisions on the volatile cryptocurrency market.
Crypto legal experts suggest that an appeal is likely, indicating that the Ripple vs. SEC saga may not be over yet. The SEC initially sought a nearly $2 billion penalty, while Ripple argued for a cap of $10 million.
The decision is a setback for the SEC, as a federal judge ordered Ripple Labs to pay a civil penalty of just over $125 million. This amount is significantly less than the $2 billion the SEC had hoped for, and the $10 million Ripple had proposed.
The price of XRP (XRPUSD), which Ripple uses in various products and services, spiked nearly 30% from the day’s low to a high of 64 cents in the hours following the fine’s announcement. This increase in trading activity, especially in South Korea, was driven by the anticipation of the SEC’s case against Ripple reaching a conclusion.
This decision comes years after the SEC first filed its complaint against Ripple in December 2020. In July 2023, Ripple secured a partial victory when the court ruled that only institutional sales of the XRP token were unregistered securities offerings, not those to retail investors. The $125 million penalty relates specifically to these institutional sales, with 1,278 transactions found to have violated Section 5 of the Securities Act of 1933.
In the latest ruling, Judge Analisa Torres also directed Ripple to cease any further violations of securities laws. The court clarified that this injunction applies to Ripple’s On-Demand Liquidity service. However, Torres rejected the SEC’s request for disgorgement and prejudgment interest, stating that the agency failed to show ‘pecuniary harm’ justifying such penalties.
Ripple CEO Brad Garlinghouse celebrated the ruling, stating, ‘This is a victory for Ripple, the industry, and the rule of law. The SEC’s headwinds against the whole of the XRP community are gone.’ In 2023, the court also set the stage for a trial on remaining issues, including allegations against Ripple CEO Brad Garlinghouse and co-founder Chris Larsen. However, the SEC later dropped these charges in October.
It remains unclear if this will be the end of Ripple’s legal disputes with the SEC. The agency could still appeal the ruling, which crypto legal experts indicate is likely. Despite this, Ripple has extended its business to jurisdictions beyond the U.S., which could mitigate the negative effects should the SEC appeal and impose additional restrictions on Ripple’s American operations.
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