Ripple Cryptocurrency Settlement: Bradley Garlinghouse and XRP

The SEC’s case against Ripple over XRP ended on August 7, 2025, when the Securities and Exchange Commission, Ripple Labs, CEO Bradley Garlinghouse, and co-founder Christian Larsen jointly dismissed their appeals at the Second Circuit. The SEC v. Ripple settlement that the two sides had negotiated earlier that year was blocked by the district court, so the parties simply walked away from their appeals instead. That left Judge Analisa Torres’s original judgment fully in force: a $125,035,150 civil penalty against Ripple, a permanent injunction against future Section 5 violations, and the July 2023 ruling that XRP sales to institutional buyers were unregistered securities offerings while programmatic sales on exchanges were not.¹²

How the Case Ended

The SEC sued Ripple, Garlinghouse, and Larsen in the Southern District of New York on December 22, 2020, alleging that Ripple’s sales of XRP amounted to a $1.3 billion unregistered securities offering under Section 5 of the Securities Act of 1933. Garlinghouse and Larsen were charged with aiding and abetting.³

Nearly five years later, in August 2025, the litigation closed without a Second Circuit ruling. Both sides had filed appeals in October 2024 after Judge Torres issued her remedies order, but a change in SEC leadership in 2025 pushed the agency toward settlement rather than continued litigation. When that settlement collapsed at the district court level, the parties abandoned their appeals and let the trial court’s final judgment stand.¹

What the Court Actually Decided About XRP

Judge Torres issued her summary judgment ruling on July 13, 2023. She declined to declare XRP itself a security or not a security. Instead, applying the Supreme Court’s 1946 Howey test, she looked at each category of sale separately and reached different results depending on who was buying and how.⁴

Direct sales to institutional investors — hedge funds, on-demand liquidity customers, and others who signed written contracts with Ripple — were investment contracts and therefore unregistered securities. Those buyers knew Ripple would use their money to develop the XRP ecosystem, satisfying Howey‘s expectation-of-profits requirement.

Programmatic sales through digital asset exchanges were not securities transactions. Because these were blind bid-ask trades executed by algorithms, retail buyers had no way of knowing whether their money went to Ripple or another seller, and the SEC failed to show they held the same investment expectations as institutional buyers.

Torres also held that XRP distributions to employees and developers as compensation did not satisfy Howey‘s first prong, since recipients were paid for services rather than making an investment. Her core holding: “XRP, as a digital token, is not in and of itself” a security; classification depends on the “totality of circumstances” surrounding each transaction.⁴

The $125 Million Penalty and Permanent Injunction

On August 7, 2024, Judge Torres issued the remedies order. She fined Ripple $125,035,150, calculated per violation across 1,278 institutional sales transactions using inflation-adjusted statutory penalty rates applicable to each contract date.⁵

She also imposed a permanent injunction barring Ripple from future Section 5 violations. Torres found a “reasonable probability of future violations” because Ripple had continued making unregistered institutional sales through its on-demand liquidity program even after the summary judgment ruling. She wrote that Ripple’s “willingness to push the boundaries of the Order evinces a likelihood that it will eventually (if it has not already) cross the line.”

The SEC had asked for much more: $876 million in disgorgement plus roughly $200 million in prejudgment interest. Torres denied that request in full, citing the Second Circuit’s decision in SEC v. Govil, which requires proof of pecuniary harm to victims for disgorgement. The agency had not shown that institutional buyers were financially harmed, and Torres called its supporting analysis speculative.⁵

Why the $50 Million Settlement Failed

New SEC leadership under Chair Paul Atkins signaled a retreat from the prior Commission’s crypto enforcement posture in early 2025.⁶ In March, Ripple said the SEC would drop its appeal. On May 8, 2025, the two sides filed a formal settlement: Ripple would pay only $50 million of the $125 million held in escrow, the rest would be returned to Ripple, the permanent injunction would be dissolved, and both appeals would be dismissed.³

SEC Commissioner Caroline Crenshaw dissented, calling it a “diluted settlement” that “razes the civil penalty ruling” and created a “regulatory vacuum” by lifting the injunction.⁷

The deal needed Judge Torres to vacate her own injunction and reduce the penalty. On June 26, 2025, she refused. Applying the “exceptional circumstances” standard under Federal Rule of Civil Procedure 60(b)(6), she held that court judgments belong “to the legal community as a whole” and are not the “property of private litigants.” A private agreement could not “absolve Ripple of its obligations under the law.” She pointed back to her earlier findings of “egregious” and “reckless” conduct and noted that a change in SEC policy did not change the facts already found. The parties were free to drop their appeals, she said, but they could not force her to undo a final judgment.⁸⁹

Six weeks later, the parties took her advice and dismissed their appeals. Ripple pays the full $125 million and remains bound by the permanent injunction.

Garlinghouse and Larsen Faced No Personal Penalty

On October 19, 2023, the SEC voluntarily dismissed the aiding and abetting charges against Garlinghouse and Larsen with prejudice, meaning they cannot be refiled. Neither executive paid any personal fine.¹⁰

The dismissal came before the individual trial that had been set for the following spring, and legal commentators read it as a tactical move to clear the way for the SEC’s appeal on the broader Section 5 ruling. Garlinghouse called the original allegations “baseless.” Ripple’s legal team called the dismissal a “surrender.”

What XRP’s Legal Status Looks Like Now

The July 2023 summary judgment ruling remains the controlling word on XRP, because neither side sought to vacate it as part of the failed settlement. Programmatic XRP sales through exchanges are not securities transactions under Howey. Direct sales to institutional buyers under written contracts are unregistered securities offerings, and the permanent injunction against Ripple’s future Section 5 violations remains in force.¹¹

One limit is worth noting. The ruling is a district court decision and applies to Ripple’s transactions; it does not set a bright-line rule for the broader crypto industry, and no appellate court weighed in because both appeals were dropped.

Ripple’s Response

Garlinghouse framed the outcome as a win, saying “the war on crypto has ended in defeat for those who turned our own government against a technology and entire industry.” Chief Legal Officer Stuart Alderoty said “XRP’s legal status as not a security remains unchanged,” referring to the programmatic-sales portion of the summary judgment.¹² Ripple pays the $125 million penalty from escrow and continues to operate under the permanent injunction.

1
SEC.gov. Joint Stipulation of Dismissal, SEC v. Ripple Labs
2
SEC.gov. SEC v. Ripple Labs Inc. Litigation Release No. 26369
3
SEC.gov. SEC v. Ripple Labs Inc. Litigation Release No. 26306
4
U.S. District Court, S.D.N.Y. SEC v. Ripple Labs Inc., Summary Judgment Order
5
Justia. SEC v. Ripple Labs Inc., Remedies Order
6
SEC.gov. SEC Press Release 2026-34
7
SEC.gov. Commissioner Crenshaw Statement on Ripple Settlement
8
Banking Dive. Ripple SEC Judge Again Denies Settlement Request to Lower Penalty
9
Nutter McClennen & Fish LLP. SEC v. Ripple Labs, June 26 2025 Order
10
CoinDesk. SEC Drops Charges Against Ripple CEO Garlinghouse, Chairman Larsen
11
American Banker. SEC Ripple Settlement Agreement Drops Fine to $50 Million
12
Banking Dive. SEC Drops Ripple Case, XRP Lawsuit