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Securities and Exchange Commission (SEC) Wins Appeal Against Ripple's Challenge

Ripple Chooses to Abandon Further Appeal Against SEC's Decision, Signaling an End to Legal Dispute with Regulatory Body

Securities and exchange regulator victory as Ripple ends counter-appeal fight
Securities and exchange regulator victory as Ripple ends counter-appeal fight

Securities and Exchange Commission (SEC) Wins Appeal Against Ripple's Challenge

In a pivotal development, Ripple has decided to withdraw its counter-claim in the long-standing legal battle with the U.S. Securities and Exchange Commission (SEC). This move comes shortly after the SEC announced its decision to drop its appeal against the tech company.

In a Twitter post, Ripple's Chief Legal Officer, Stuart Alderoty, confirmed the development. He stated, "Last week, the SEC agreed to withdraw its appeal without any conditions. Now, Ripple has decided to drop its counterclaim."

The legal saga between Ripple and the SEC dates back to December 2020 when the SEC accused Ripple of selling unregistered securities worth $1.3 billion in the form of XRP. Both Ripple CEO Brad Garlinghouse and co-founder Chris Larsen were also named as defendants.

In July 2023, Judge Analisa Torres of the Southern District of New York ruled that Ripple's programmatic sales and other distributions of XRP did not constitute an offer or sale of investment contracts. However, the judge noted that sales of the token to institutional investors violated securities laws. The court later rejected the SEC's interlocutory appeal, citing insufficient evidence.

Following this, the SEC withdrew its lawsuit against Garlinghouse and Larsen. The parties reached a settlement, eliminating further charges on the same grounds. In August 2024, Judge Torres issued a final ruling, fining Ripple $125 million—a significant reduction from the SEC's original demand of $2 billion. In October, the SEC appealed the verdict.

In the following months, the SEC took steps to challenge previous court decisions, arguing that the law had been misapplied. The regulator sought to revisit the sales and offers of XRP on digital asset platforms, the involvement of Garlinghouse and Larsen, and token distributions "in exchange for non-cash compensation."

According to the terms of the settlement, Ripple will pay a $50 million fine to the SEC, with the rest of the $125 million fine to be returned to Ripple. The agency will also request the court to lift the standard injunction previously imposed at its request.

The SEC's actions have been met with criticism from some quarters. SEC Commissioner Caroline A. Crenshaw expressed dissatisfaction with the settlement, stating it undermines the court's role in interpreting securities laws. The settlement is seen as a significant step towards the conclusion of the prolonged legal battle between Ripple and the SEC.

It is worth noting that the SEC has preliminarily agreed to drop its lawsuit against ConsenSys, end its investigation into Uniswap Labs, and withdraw claims against the crypto division of online broker Robinhood, which adds a layer of complexity to the regulatory landscape for cryptocurrencies.

[Referenced from: Enrichment Data] The settlement agreement faced procedural challenges as Judge Analisa Torres initially rejected the proposal, citing flaws in how it was filed. Despite these issues, the settlement was progressed, and Ripple was able to regain $75 million that was previously held in escrow. The settlement also includes provisions that Ripple would be permanently restrained and enjoined from future violations of Section 5 of the Securities Act, meaning Ripple must comply with securities laws in the future but avoids the classification of XRP as a security under certain conditions.

  1. Ripple's decision to withdraw its counter-claim in the legal battle with the SEC, as confirmed by Stuart Alderoty, signals a significant development in the business-technology arena, particularly in the realm of finance and digital assets.
  2. In a departure from its earlier stance, the SEC has agreed to drop its appeal and lawsuit against Ripple, ConsenSys, and other crypto-related entities, raising questions about the regulatory future of finance in the technology-driven business world.

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