A crypto commissioner at the U.S. Securities and Exchange Commission (SEC) has sharply criticized her agency’s proposed settlement with Ripple, sparking debate over the future regulatory landscape for digital assets. The SEC and Ripple have jointly filed a request in a New York court to dissolve the August 2024 injunction against Ripple, aiming to return $75 million of the $125 million held in escrow to the company. This move, according to a May 8 statement from the SEC, has provoked backlash from within the agency.
A Fractured Regulatory Front
Commissioner Caroline Crenshaw minced no words in her May 8 statement, lambasting the settlement as a blow to the SEC’s enforcement credibility. “This settlement, alongside the programmatic disassembly of the SEC’s crypto enforcement program, does a tremendous disservice to the investing public and undermines the court’s role in interpreting our securities laws,” she asserted. Her critique highlights a growing tension within the SEC, as the agency appears to be retreating from the aggressive regulatory stance shaped under former Chair Gary Gensler’s leadership. For a deeper dive into the regulatory implications, see our coverage of the SEC’s latest guidance.
Crenshaw’s concerns are amplified by the potential ramifications of the settlement. She warns that if Judge Torres accepts the terms, it would effectively erase the investor protections previously secured, leaving what she describes as a “regulatory vacuum” until a comprehensive framework is established. “The settlement is not in the best interests of the investors and markets that our agency is tasked with serving and protecting,” Crenshaw stated. “It creates more questions than answers.”
Ripple’s Legal Labyrinth
Despite the settlement’s proposal, the Ripple case is far from concluded. Legal experts, including former federal prosecutor James Filan, note that several procedural hurdles remain. Judge Torres must first issue an indicative ruling on the settlement, a decision that could then lead the SEC and Ripple to seek a limited remand from the Second Circuit Court of Appeals. This procedural dance, if successfully executed, would pave the way for the agreed settlement’s finalization.
Filan, in his analysis published on May 8, emphasized the complexity of the legal proceedings. “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,” he explained. However, the road to resolution is laden with legal intricacies that underscore the uncertainty still looming over Ripple’s future.
A Tumultuous Journey
Ripple’s legal saga began in December 2020 when the SEC accused the firm of selling its XRP token as an unregistered security. The case has since become a lightning rod for discussions on crypto regulation, illustrating the contentious and often opaque nature of securities law as applied to digital assets. In August of last year, Ripple was ordered to pay $125 million in penalties after a judge ruled that its XRP sales to institutional investors fell under securities regulations. This follows a pattern of institutional adoption, which we detailed in our analysis of corporate treasury investments.
The proposed settlement, thus, represents a significant turning point, but not without its critics. As the SEC’s internal rift grows, the broader implications for the crypto industry remain uncertain. Will this settlement signal a shift towards more lenient regulatory approaches, or will it serve as a catalyst for renewed scrutiny?
Looking Ahead
As the crypto world watches with bated breath, the potential dissolution of the Ripple injunction and the return of funds could set a precedent for future regulatory actions—or inactions. The unfolding drama raises pivotal questions about the SEC’s strategy and its capacity to effectively regulate an industry defined by rapid innovation and volatility.
The coming months will be crucial in determining how these dynamics play out. For now, the Ripple case serves as a stark reminder of the complexities at the intersection of technology and regulation. Whether this settlement will indeed create a “regulatory vacuum” or lead to a more balanced approach remains to be seen. What’s certain is that the crypto industry—and its regulators—are navigating uncharted waters.
Source
This article is based on: SEC’s Crenshaw slams Ripple settlement, warns of ‘regulatory vacuum’
Further Reading
Deepen your understanding with these related articles:
- US crypto groups urge SEC for clarity on staking
- U.S. Congress Braces for Intense Debate Over Crypto Legislation This Summer (openai)
- SEC Ditches PayPal’s PYUSD Probe, Removing Key Regulatory Hurdle for Its Stablecoin
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
