Federal judge finds Ripple did not violate securities laws by selling XRP through exchanges

• Last year, a federal judge ruled that Ripple’s institutional sales of XRP violated federal securities laws and subsequently fined it $125 million.

• The judge reiterated her view that Ripple’s programmatic sales of XRP to retail investors through exchanges did not violate federal securities laws.

On Wednesday, a federal judge ordered Ripple to pay a $125 million civil penalty and issued an injunction against future securities law violations.

U.S. District Judge Analisa Torres of the Southern District of New York imposed the fine after finding that Ripple violated securities laws in 1,278 institutional sales transactions. The $125.035 million fine is far less than the $1 billion in disgorgement and prejudgment interest and $900 million in civil penalties sought by the SEC.

Wednesday’s remedial order follows the judge’s ruling in the case itself in July 2023, which found that Ripple had violated federal securities laws by selling XRP directly to institutional customers, but she also ruled that Ripple’s programmatic sales of XRP to retail investors through exchanges did not violate any securities laws.

The SEC unsuccessfully attempted to appeal that portion of the ruling while the case was pending.

On Wednesday, Judge Torres also enjoined Ripple from future violations of federal securities laws, saying that while she had not determined that Ripple had violated any laws following the SEC’s lawsuit, the company had likely “crossed the line” in connection with portions of Ripple’s “On-Demand Liquidity” product.

“Rather, the court finds that Ripple’s willingness to push the boundaries of the order indicates a high probability that it will eventually (if it has not already) cross those boundaries, ” she said. “On balance, the court finds that there is a reasonable likelihood of future violations that warrant an injunction.”

The injunction filing requires Ripple to file a registration statement if it intends to sell any securities.

Now that the judge has imposed the sentence, the SEC will likely appeal the July 2023 ruling, after the same judge denied the SEC’s motion for a preliminary appeal last year.

After that appeal was dismissed, the SEC and Ripple settled charges against CEO Brad Garlinghouse and other executives.