After the SEC’s lawsuit against Ripple co-founders Chris Larsen and Brad Garlinghouse was dismissed on Thursday, many are wondering what comes next in Ripple’s ongoing legal fight with the securities regulator. While the charges against the executives have been dropped, the lawsuit itself has not been entirely resolved.
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Penalty Phase Likely Ahead
According to crypto journalist Eleanor Terrett, with Larsen and Garlinghouse no longer facing charges, the case now moves to a penalty phase to determine appropriate fines for Ripple’s $700 million+ in institutional XRP sales. Lawyers expect a contentious fight between the two sides over the penalty amount.
“The SEC will still want a substantial penalty for bragging rights,” say lawyers not involved in the case, so “expect a big fight.” “But Ripple will likely be able to reduce it down significantly.”
Though the penalty could reach hundreds of millions, Ripple will argue the distributions were simply currency transactions, not securities offerings, and deserve minimal or no fines.
SEC Appeal Still Possible
The SEC also retains the option to appeal Judge Analisa Torres’ dismissal of charges related to Ripple’s “programmatic sales” and “other distributions” of XRP.
Torres previously denied the SEC’s request to immediately appeal her decision, stating the agency must wait until after a trial concludes. With the charges now dropped, the SEC may file an appeal during or after the penalty phase.
However, lawyers view an appeal as unlikely to succeed after Torres firmly rejected the SEC’s arguments. Her ruling that these XRP transactions were currency, not securities, deals a major blow to the SEC’s lawsuit.
Big Win for Crypto Industry
Despite remaining issues, Ripple and the broader crypto industry are hailing Thursday’s dismissal as a monumental victory setting an important precedent.
Torres’ ruling restricts the SEC’s ability to bring securities charges against cryptocurrencies, unless they involve an explicit investment contract. This could pave the way for clearer regulatory frameworks and greater mainstream adoption.
After numerous defeats, the SEC faces growing pressure to revise its approach to crypto regulation. Thursday’s dismissal represents Ripple’s most significant triumph yet, though the company’s legal fight is far from over.
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