XRP Settlement Faces SEC Criticism Over Regulatory Risks

In a surprising turn for XRP and Ripple, scrutiny continues to mount despite recent legal developments suggesting a resolution is near. A key commissioner from the United States Securities and Exchange Commission (SEC) has strongly criticized a proposed settlement between the regulatory agency and Ripple, raising significant concerns about the future integrity of crypto enforcement.

The legal dispute between Ripple and the SEC, which has stretched since December 2020, appears to be approaching its end. Both parties submitted a joint request in a New York court to lift a previously issued injunction against Ripple, originally set to remain in effect through August 2024. This proposal includes returning $75 million—part of the $125 million civil penalty—to Ripple from an escrow account. The move, however, did not sit well with everyone at the SEC.

SEC Commissioner Caroline Crenshaw voiced her opposition in a statement dated May 8, criticizing the resolution as detrimental to the agency’s effectiveness in overseeing the cryptocurrency sector. She argued that the deal undercuts previous legal findings and diminishes the role of the judiciary in interpreting financial regulations. Crenshaw emphasized that, “This settlement, alongside the weakening of crypto enforcement efforts, fails the investing public and undercuts court authority.”

According to Crenshaw, such settlements could create confusion and inconsistency among prosecutors representing the regulatory agency. She noted that enforcement personnel are now taking positions contrary to their earlier stances, which undermines the SEC’s word in ongoing and future cases.

Recent patterns reveal that the SEC, particularly under shifting political leadership, has begun reducing its aggressive stance toward crypto businesses. This retreat includes the dismissal of lawsuits brought under Directive from SEC leaders like Gary Gensler. Crenshaw believes this evolving approach has created a gap in regulatory clarity and accountability for crypto firms, a vacuum she considers harmful to retail investor protections won through the case thus far.

She warned that dissolving the injunction would eliminate important safeguards and delay necessary regulation until an official crypto framework is established by the SEC’s crypto task force.

“This settlement fails to serve the best interests of American investors or markets,” she warned, adding that the current agreement leaves too many questions unanswered, a stance that reflects growing tension inside the SEC regarding its role in the digital asset landscape.

Legal Process Still Ongoing for Ripple

Despite the joint filing, the legal process is not yet complete. Former federal prosecutor James Filan explained that several procedural steps remain before the agreement is finalized. First, Judge Analisa Torres must issue a preliminary indication of approval. If Torres agrees, Ripple and the SEC will formally request a limited remand from the Second Circuit Court of Appeals, returning the case to her courtroom.

This remand would allow the judge to officially approve the settlement and dissolve the injunction. Following that, Ripple would receive the agreed-upon escrowed funds, and both parties would move to dismiss their respective appeals in the higher court.

This case originally stemmed from the SEC’s accusation that Ripple illegally sold XRP tokens as unregistered securities. In August 2023, a judge ruled partially in favor of the SEC, ordering Ripple to pay a $125 million civil penalty for selling XRP to institutional investors, signaling XRP transactions in that context were subject to securities laws.

Related: Expert Advice: Sell XRP If You’re Confused

Though a conclusion seems within reach, the backlash within the SEC signals continued volatility in how crypto-related enforcement is approached and interpreted. For Ripple and XRP holders, the settlement could mark an important chapter’s close—but public debate surrounding the legal framework for digital assets is far from over.