SEC and Ripple End Legal Battle, Finalizing XRP’s Hybrid Status

Introduction

On August 7, 2025, the U.S. Securities and Exchange Commission (SEC) and Ripple Labs jointly filed to dismiss their appeals in a four-year legal dispute over XRP’s classification, effectively ending a landmark case that began in December 2020. The U.S. Court of Appeals for the Second Circuit recognized the dismissal, with both parties agreeing to cover their own legal costs. The decision finalizes a 2023 ruling by Judge Analisa Torres, which deemed XRP a non-security for public exchange sales but a security for institutional sales, with Ripple ordered to pay a $125 million fine. The resolution, coupled with a crypto-friendly shift under the Trump administration, drove XRP’s price to $3.31, a 10.6% 24-hour surge. While Ripple celebrates the closure, the case’s mixed precedent leaves lingering questions for crypto regulation.

Key Points

• Case Resolution: The SEC and Ripple filed a joint stipulation on August 7, 2025, dismissing the SEC’s appeal (Case No. 24-2648) and Ripple’s cross-appeal (Case No. 24-2705) in the Second Circuit. The dismissal ends a lawsuit initiated in 2020, alleging Ripple raised $1.3 billion through unregistered XRP securities offerings.

• 2023 Ruling Upheld: Judge Torres’ July 2023 decision stands, ruling that XRP sales on public exchanges are not securities, but institutional sales violated securities laws. Ripple was fined $125 million, significantly less than the SEC’s $2 billion demand, and faces a permanent injunction on unregistered institutional XRP sales.

• Market Impact: XRP surged 10.6% to $3.31 within 24 hours, with a peak of $3.56 on July 22, 2025, reflecting a 99% gain from its April 9 low of $1.79. The broader crypto market saw gains, with Bitcoin up 2.2% to $84,096 and Ethereum up 6.6% to $2,031.

• Regulatory Context: The dismissal aligns with the Trump administration’s crypto-friendly policies, including dropping multiple SEC enforcement actions and approving in-kind creations for crypto ETPs. Ripple’s CEO Brad Garlinghouse praised the SEC’s new leadership, while Chief Legal Officer Stuart Alderoty called it “the end… and now back to business.”

• Industry Implications: The ruling establishes a hybrid precedent for XRP, potentially guiding future token classifications. Ripple’s $200 million acquisition of Rail Financial and potential XRP ETF applications signal renewed focus on expansion.

Critical Analysis

The article frames the SEC-Ripple resolution as a victory for Ripple and the crypto industry, but its implications and the underlying dynamics warrant closer examination:

• Hybrid Precedent’s Ambiguity: The 2023 ruling’s split classification—XRP as a non-security for retail sales but a security for institutional sales—offers partial clarity but complicates compliance. The article suggests this precedent will shape future token cases, yet it leaves unresolved how other tokens with similar retail-institutional sales models will be treated. The lack of a clear securities definition, as seen in ongoing debates over Ethereum’s status, undermines the ruling’s broader applicability.

• Regulatory Pivot Under Trump: The dismissal reflects a broader SEC shift under the Trump administration, which has dropped over a dozen crypto-related cases since January 2025. The article attributes this to new SEC leadership and policies like the Blanche Memo, discouraging enforcement without clear criminal intent. However, it overlooks dissent, such as SEC Commissioner Caroline Crenshaw’s opposition to the settlement, warning of weakened investor protections. This suggests internal SEC tensions that could resurface under future administrations.

• Failed Settlement Attempts: The article omits details of earlier settlement efforts, where Ripple and the SEC proposed reducing the $125 million fine to $50 million and lifting the institutional sales injunction. Judge Torres rejected these in June 2025, citing procedural errors and Ripple’s ongoing securities law obligations. This rejection, detailed in Bloomberg Law, forced Ripple to accept the full fine and injunction, tempering claims of a “resounding victory.”

• Market Reaction vs. Fundamentals: The 10.6% XRP price surge reflects investor optimism, but the article overstates its significance by linking it solely to the lawsuit’s end. XRP’s 99% gain since April 2025 also stems from broader market trends, including Bitcoin’s 104% yearly rise and Ethereum ETF inflows. The article fails to note XRP’s volatility, with a 30% drop after its July peak, suggesting the rally may be speculative rather than fundamental.

• Ripple’s Strategic Moves: The article mentions Ripple’s focus on “business” post-lawsuit but underplays its $200 million Rail Financial acquisition, announced August 7, 2025, to bolster stablecoin and payment services. This move, coupled with XRP ETF buzz, indicates Ripple is leveraging legal clarity to compete with platforms like Stellar and Solana, though the injunction limits institutional sales growth.

• Global Context: The article lacks comparison to global regulatory trends, such as Asia’s crackdowns (e.g., Philippines’ exchange bans) or Europe’s MiCA framework, which contrast with the U.S.’s softening stance. This omission limits understanding of how Ripple’s precedent might influence cross-border operations, especially as XRP adoption grows for payments in Asia.

Supporting Data

• Legal Details: The Second Circuit filing on August 7, 2025, dismissed both appeals, with Ripple’s $125 million fine in escrow for U.S. Treasury transfer. The injunction on institutional XRP sales remains.

• Market Data: CoinGecko reports XRP’s $3.31 price, a 10.6% 24-hour gain, and $146 billion market cap, making it the third-largest crypto. Bitcoin and Ethereum rose 2.2% and 6.6%, respectively.

• Regulatory Context: The SEC dropped claims against Ripple executives Brad Garlinghouse and Chris Larsen in October 2023. The agency’s 2025 policy shift includes approving crypto ETP in-kind creations and forming a Crypto Task Force.

• Ripple’s Moves: Ripple’s Rail Financial acquisition enhances its XRPL-based stablecoin offerings, like RLUSD. XRP ETF applications are pending, per industry reports.

• Historical Context: The SEC’s 2020 lawsuit alleged $1.3 billion in unregistered XRP sales. The 2023 ruling reduced penalties from $2 billion to $125 million.

Conclusion

The SEC-Ripple settlement marks a pivotal moment for crypto regulation, cementing XRP’s hybrid status and removing a major legal overhang for Ripple. The 2023 ruling’s precedent offers partial clarity for token classification but leaves ambiguities that may challenge other projects. The Trump administration’s crypto-friendly pivot facilitated the dismissal, yet internal SEC dissent and the upheld $125 million fine temper Ripple’s “victory.” XRP’s price surge and Ripple’s strategic acquisitions signal optimism, but market volatility and global regulatory disparities pose risks. The case underscores the need for clearer U.S. crypto laws, potentially via proposals like the CLARITY Act, to balance innovation and compliance.