SEC reportedly preparing to drop Ripple lawsuit, XRP jumps 5%

The US Securities and Exchange Commission (SEC) is reportedly on the verge of wrapping up its lengthy lawsuit against Ripple, the issuer of XRP.

In response to these developments, the price of XRP surged approximately 5%, rising from $2.14 to $2.24 in just an hour, and it was trading at $2.23 at the time of writing.

According to journalist reports citing two “well-informed sources,” the case has entered its final stages, although discussions regarding the settlement terms are still taking place.

The sources suggested that the central issue in the settlement negotiations seems to be Ripple’s attempts to achieve more favorable conditions tied to an August ruling made by District Judge Analisa Torres from the Southern District of New York. 

Admission of wrongdoing

Ripple’s legal representation has reportedly contended that if the SEC, under new leadership, aims to reset its enforcement actions against crypto firms for clearer regulations, then the penalties levied against Ripple should also be re-evaluated.

Sources indicate that Ripple’s stance is that accepting the court’s ruling would imply an admission of guilt. The SEC’s changing perspective on cryptocurrency regulation complicates this assertion.

If the regulator is now questioning the validity of certain enforcement actions, Ripple argues that it should not be bound by terms that may no longer reflect the agency’s evolving priorities.

While the sale of XRP to retail was not classified as an unregistered securities offering, Judge Torres ruled that Ripple’s institutional sales of the token amounted to investment contracts and thus violated securities laws.

This led to a $125 million fine against the company and included a permanent ban on selling XRP to institutional investors. Both sides were preparing their appeals prior to these rumors emerging.

On March 1, lawyer James Murphy, known as MetaLawMan, speculated that the SEC might accept a settlement to drop appeals and receive the $125 million penalty “in a heartbeat.”

However, this outcome may not be advantageous for Ripple, especially if the company is contemplating a future exempt securities offering or an initial public offering.

Shifting Stance

As of March 4, the SEC suspended 11 lawsuits and investigations involving crypto firms, including notable cases against Binance, Coinbase, Kraken, and Consensys.

These actions align with the legal clarity sought by the new SEC leadership, which features pro-crypto Commissioner Mark Uyeda as acting chair and pro-crypto Commissioner Hester Peirce heading the Crypto Task Force.

Importantly, the Crypto Task Force represents the regulator’s first dedicated initiative to create a comprehensive framework for crypto rulemaking, countering the previous administration’s “regulation by enforcement” approach.

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