SEC Reportedly Preparing to Drop Ripple Lawsuit, XRP Jumps 5%

The US Securities and Exchange Commission (SEC) is reportedly preparing to conclude its long-running lawsuit against Ripple, the issuer of XRP. Following the rumors, the XRP price climbed roughly 5% from $2.14 to $2.24 within an hour. It was trading at $2.23 as of press time. Citing two “well-placed sources,” journalist Eleanor Terrett reported that the case is in the final stages of resolution, though negotiations over the terms of a settlement remain ongoing.

The sources added that the primary point of contention in the settlement discussions appears to be Ripple’s efforts to secure more favorable terms regarding an August ruling by District Judge Analisa Torres from the District Court of the Southern District of New York.  Ripple’s legal team reportedly argued that if the SEC, under new leadership, is moving to reset enforcement actions against crypto firms in favor of regulatory clarity, the penalties imposed on the firm should also be reconsidered.

According to Terrett, Ripple’s legal position is that accepting the court ruling would require an implicit admission of wrongdoing. The SEC’s evolving stance on crypto regulation complicates this position. If the regulator now questions whether certain enforcement actions were warranted, Ripple contends it should not be held to terms that may no longer align with the agency’s shifting priorities.

Although the sale of XRP to retail was not considered an unregistered securities offering, Judge Torres ruled that Ripple’s institutional sales of XRP constituted investment contracts, violating securities laws. As a result, the decision imposed a $125 million penalty on the company and included a permanent injunction prohibiting the sale of XRP to institutional investors. Both parties were preparing their appeals before the rumors surfaced.

On March 1, lawyer James Murphy, known as MetaLawMan, speculated that the SEC would have accepted a settlement to drop appeals and receive the $125 million penalty “in a heartbeat.” However, the outcome would not be favorable for Ripple, especially if the company is considering a future exempt securities offering or an initial public offering. As of March 4, the SEC halted 11 lawsuits and investigations against crypto firms, including high-profile cases such as Binance, Coinbase, Kraken, and Consensys.

The moves align with the legal clarity sought by the new SEC administration, which includes pro-crypto Commissioner Mark Uyeda as acting chair and pro-crypto Commissioner Hester Peirce as head of the Crypto Task Force. Notably, the Crypto Task Force is the first crypto-focused effort from the regulator to establish a comprehensive framework for rulemaking, opposing former SEC chair Gary Gensler’s “regulation by enforcement” stance.