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A recent Manhattan federal court ruling reaffirms that despite a more crypto-friendly stance from the SEC, existing securities laws still apply firmly to digital assets like XRP.
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U.S. District Judge Analisa Torres denied Ripple Labs and the SEC’s joint request to reduce a $125 million penalty and remove an injunction related to XRP’s classification as an unregistered security.
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According to COINOTAG, Judge Torres emphasized that the SEC’s enforcement actions maintain legal weight, underscoring that neither party can disregard a court’s final judgment on securities violations.
Manhattan judge upholds XRP penalties, reinforcing SEC’s regulatory authority amid evolving crypto landscape and Ripple’s ongoing legal battle.
Manhattan Federal Court Upholds XRP Penalties Amid SEC’s Crypto-Friendly Shift
In a significant ruling, U.S. District Judge Analisa Torres rejected a proposal by Ripple Labs and the Securities and Exchange Commission (SEC) to reduce a $125 million civil penalty imposed last year. The court also refused to lift an injunction restricting Ripple’s sale of XRP tokens. This decision highlights that despite the SEC’s recent softer approach toward cryptocurrency enforcement, the legal framework governing digital assets remains stringent. The SEC initially sought a $2 billion penalty under former Chair Gary Gensler, but the court had previously reduced this to a more moderate figure, reflecting the nuanced nature of Ripple’s sales practices.
Legal Precedent and the SEC’s Enforcement Authority
Judge Torres’ ruling underscores the enduring power of the SEC to enforce securities laws, even as regulatory attitudes evolve. The court recognized that while Ripple’s programmatic sales of XRP did not violate securities laws, its institutional sales did, justifying the penalty. Importantly, the judge noted that once a court has issued a final judgment, neither the SEC nor Ripple can unilaterally disregard it. This reinforces the principle that regulatory enforcement actions carry lasting legal consequences, regardless of shifts in agency policy or leadership.
Ripple’s Response and Market Implications
Ripple’s Chief Legal Officer, Stuart Alderoty, responded on social media, stating that “the ball is back in our court,” signaling the company’s intention to continue its legal battle or explore other options. He emphasized that XRP’s legal status as not being a security remains unchanged from Ripple’s perspective. Market reaction to the ruling was modest, with XRP trading around $2.12, up 3.7% in the last 24 hours. Over the past year, XRP’s price has surged by 347%, a trend analysts attribute partly to reduced regulatory uncertainty following the SEC’s softened stance.
Broader Impact on Crypto Regulation and Industry Outlook
This ruling illustrates the lasting impact of enforcement actions initiated under previous SEC leadership, particularly former Chair Jay Clayton. Despite efforts by the current administration to adopt a more crypto-friendly regulatory approach, courts continue to uphold earlier judgments. Judge Torres pointed out that the SEC has dismissed other crypto cases before violations were found, making the Ripple case a notable exception. This sets a precedent that could influence how other digital assets are regulated and litigated in the future, emphasizing the importance of compliance with securities laws.
Potential Paths Forward for Ripple and the SEC
The court also highlighted that both parties have the option to end the litigation by withdrawing their appeals, which could bring finality to this protracted legal dispute. Ripple has previously indicated a willingness to escalate the case to the Supreme Court if necessary, underscoring the high stakes involved. Meanwhile, the SEC’s approach continues to balance enforcement with a recognition of the crypto industry’s growth and innovation potential.
Conclusion
Judge Torres’ decision reaffirms the SEC’s regulatory authority over digital assets like XRP, even amid changing political and regulatory climates. The ruling sends a clear message that compliance with securities laws remains paramount and that court judgments carry enduring legal force. For Ripple and the broader crypto industry, this case highlights the complex interplay between innovation, regulation, and legal accountability, shaping the future trajectory of digital asset governance.
