XRP Settlement Motion Rejected Over Legal Procedure Misstep

XRP has once again taken center stage as a legal procedural error disrupts a potential resolution between Ripple and the U.S. Securities and Exchange Commission (SEC). A federal judge has thrown out a joint request from Ripple and the SEC to approve a settlement and dissolve an existing injunction. The rejection highlights a critical misstep in how the request was filed, not the substance of the settlement itself.

On May 15, U.S. District Judge Analisa Torres declined the recent motion submitted by both Ripple and the SEC. This filing, made on May 8, aimed to secure approval for ending the legal case with a proposed adjustment in the agreed-upon $125 million penalty. Under the proposed terms, Ripple would pay a $50 million fine to the SEC, while the remaining sum held in escrow would be returned to the company.

Judge Torres rejected the motion due to a procedural flaw, emphasizing that the parties had not filed the request under Rule 60 of the Federal Rules of Civil Procedure, which governs post-judgment relief. Instead, the motion was submitted for “settlement approval,” a format that does not apply in this post-verdict situation. The court pointed out that the motion failed to even mention Rule 60, let alone meet its requirements, such as demonstrating extraordinary circumstances. This oversight led Judge Torres to conclude that the motion could not be approved—even if jurisdiction were restored from the appellate court.

This decision doesn’t signal a breakdown in the ongoing settlement discussions. Ripple’s Chief Legal Officer, Stuart Alderoty, clarified that the misunderstanding is purely procedural. He reiterated that both parties remain cooperative and intend to address the issue correctly and continue toward resolution.

Legal insight from crypto lawyer Fred Rispoli echoed this sentiment. He described the denial as more of a formality, noting that the court was unsatisfied with the lack of legal rigor in the request. According to Rispoli, the SEC and Ripple essentially tried to take a shortcut, assuming Judge Torres would permit the adjustment without meeting all procedural criteria. Going forward, he recommended that the companies submit a detailed motion under Rule 60, complete with formal declarations and updated documentation.

Ripple and the SEC’s initial motion was part of their effort to expedite the final steps in their years-long legal confrontation. The lawsuit, first launched in December 2020, accuses Ripple of engaging in an unregistered securities offering through its XRP token. Ripple’s executive team, including Brad Garlinghouse and Chris Larsen, were also named as co-defendants.

A pivotal moment came in July 2023 when Judge Torres issued a split ruling. The court found that Ripple’s institutional XRP sales broke securities law, but its XRP transactions through secondary markets did not. This distinction later led to an August 2024 final judgment, which included monetary penalties and an injunction against Ripple.

Discussions between the two entities progressed significantly earlier this year. In April, they jointly moved to pause their appeals in the Second Circuit, indicating that they had reached an agreement in principle to settle. The May 8 motion aimed to secure a favorable indication from the district court in order to halt the appeals process and finalize the agreement.

However, due to the incorrect filing method, that motion has been denied for now. Both Ripple and the SEC must now decide whether to refile the request properly using the framework established by Rule 60. Legal analysts, including Rispoli, estimate that the revised motion could take two to three weeks to draft, with a court response possible in another few weeks.

Despite this temporary hurdle, the end of what has now been a nearly four-year battle between Ripple and the SEC seems to be in sight. Stakeholders in the XRP ecosystem are closely watching the developments, as the case’s outcome could significantly influence the regulatory landscape for crypto assets in the United States. Ripple’s leadership remains optimistic, and industry insiders view this pause as a delay—not a derailment—of the broader settlement efforts.

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

Read more about Ripple on their company profile. Learn more about XRP. Additional context was provided by referencing settlements such as Citigroup.