The U.S. Securities and Exchange Commission (SEC) published a Litigation Release on May 8 announcing a settlement agreement with Ripple Labs Inc., CEO Brad Garlinghouse, and co-founder Chris Larsen to resolve its long-running civil enforcement case. Originally initiated on Dec. 22, 2020, in the Southern District of New York, the case accused the defendants of engaging in unregistered securities offerings through the sale of XRP tokens. The joint filing asks the court to issue an indicative ruling that could ultimately dissolve a previously issued injunction and unlock escrowed penalty funds.

Under the proposed settlement, the $125,035,150 held in escrow—imposed under the court’s Aug. 7, 2024, final judgment—would be divided, with $50 million transferred to the SEC and the remaining balance returned to Ripple. This arrangement would only move forward if the court provides an indication that it would dissolve the injunction and allow the release of funds. If such a ruling is made, both the SEC and Ripple intend to seek a limited remand to the district court so it can formally issue the requested relief. Once granted, both parties would move to end their ongoing appeals before the U.S. Court of Appeals for the Second Circuit.

The SEC explained that the settlement reflects its strategic regulatory goals rather than an assessment of the lawsuit’s merits, stating:

The Commission’s decision to exercise its discretion and seek a resolution of this pending enforcement action rests on its judgment that such resolution will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action.

The agency clarified: “The Commission’s decision to resolve this enforcement action does not necessarily reflect the Commission’s position on any other case.” Although the SEC made the settlement with Ripple official in a Litigation Release, the crypto industry had long anticipated the move after Ripple’s CEO revealed the agency’s plan to drop the case over XRP sales on social media.

Since Gary Gensler’s exit from the SEC in January, the agency has taken a more crypto-friendly stance under new Chair Paul Atkins. It has paused or dropped several enforcement actions against crypto firms and launched a series of public roundtables to collaborate with the industry. This marks a shift from Gensler’s aggressive, regulation-by-enforcement approach to one focused on clearer, innovation-friendly regulation.

Attorney James K. Filan, a prominent legal analyst who has closely monitored the SEC’s lawsuit against Ripple over XRP, shared this significant update on social media platform X, stating: “The SEC has filed the Settlement Agreement Letter.” He broke down the procedural roadmap, explaining the sequential steps that must occur before the case is officially over.

First, U.S. District Judge Analisa Torres must issue an indicative ruling on whether she would dissolve the injunction and approve the release of the escrowed funds, allowing $50 million to go to the SEC and the rest to Ripple. If Judge Torres indicates she would grant that relief, the parties will then jointly ask the Second Circuit for a limited remand back to her courtroom. Upon the remand being granted, the SEC and Ripple would file a motion formally requesting that relief. Filan concluded:

After the injunction is dissolved and the funds distributed, the SEC and Ripple will ask the Court of Appeals to dismiss the SEC’s appeal and Ripple’s cross-appeal. Then it will be over.

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