Ripple's Settlement with the Securities and Exchange Commission Progresses, Yet a Commissioner Issues a Warning
The United States Securities and Exchange Commission (SEC) has reached a settlement agreement with Ripple Labs, CEO Brad Garlinghouse, and co-founder Christian A. Larsen. However, SEC Commissioner Caroline Crenshaw has voiced her opposition to the agreement, stating that it does a disservice to the investing public and undermines the court's role in interpreting securities laws.
The settlement outlines a path for resolving the ongoing civil enforcement case against Ripple. If the district court signals its intention to lift the injunction and release the escrowed penalty funds, both parties will request a limited remand for this relief. The $50 million from the escrowed civil penalty will go to the SEC to fully satisfy the penalty, with the remaining amount being returned to Ripple.
Commissioner Crenshaw has outlined three reasons for her opposition to the settlement agreement. Firstly, she argues that the SEC agreed to the settlement because it was worried it could lose its appeal against Ripple. The fact that the judge rejected the settlement and Ripple subsequently dropped its cross-appeal reinforced her view that the SEC’s position was weak.
Secondly, Crenshaw warns that the settlement could weaken the SEC’s ability to enforce securities laws effectively in the crypto space, potentially distorting how securities regulations are applied to crypto assets. She is particularly concerned about the lack of clarity on when XRP and similar tokens should be considered securities, especially distinguishing between institutional sales (potentially securities) and programmatic sales (potentially not).
Thirdly, Crenshaw contends that the settlement does not serve the best interests of investors or the broader market. She believes it does not provide clarity but rather introduces further uncertainty, leaving key regulatory questions unresolved at a time when the industry needs clear guidance.
Beyond the Ripple case, Crenshaw has been the lone SEC commissioner consistently voting against crypto-friendly policies such as crypto ETFs and favorable SEC statements on liquid staking. She considers many SEC crypto regulatory decisions "unsound" or unclear, adding to her opposition to the Ripple settlement.
The SEC's move to pursue a resolution is aimed at advancing its efforts to update and strengthen its regulatory framework for the cryptocurrency industry. The agreement includes language stating that neither the SEC nor Ripple would move to amend or overturn the district court's summary judgment. However, Crenshaw is concerned that the settlement undercuts the authority of the court's previous ruling.
The court's final decision on the matter is anticipated by August 2024. If the settlement is approved, it could set a precedent for future crypto-related cases, potentially affecting the regulatory landscape of the cryptocurrency industry.
The settlement between Ripple, SEC, Garlinghouse, and Larsen might impact the future of business and finance involving cryptocurrencies, particularly XRP. Commissioner Crenshaw, voicing her opposition, is concerned that the agreement could weaken the SEC's authority in enforcing securities laws, lack clarity regarding when tokens should be considered securities, and hinder providing clear guidance to investors and the broader market.
