The long-standing legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has reached a critical juncture, with both sides fiercely contesting the appropriate penalties and injunctions in their final briefs. The SEC is pushing for a staggering $2 billion penalty against Ripple, arguing that the company's sale of XRP to institutional investors violated securities laws, while Ripple has countered with a significantly lower proposal of $10 million.
In its latest filing, the SEC slammed Ripple's $10 million counterproposal as a mere "slap on the wrist," asserting that such a lenient penalty would only encourage other crypto asset issuers to violate Section 5 of the Securities Act. The regulator's lawyers argued that Ripple's proposed penalty would make it a "remarkably lucrative endeavor" for companies to flout securities laws, depriving investors of the disclosures mandated by Congress.
The SEC's remedies brief also sought permanent injunctions against Ripple, contending that there is a "reasonable likelihood" of the company repeating its alleged wrongdoing. The regulator dismissed Ripple's assurances of compliance, stating that the company's primary business continues to be "unregistered sales of XRP," as it has been since 2013.
Ripple's Chief Legal Officer, Stuart Alderoty, lashed out at the SEC following the release of the remedies brief, accusing the regulator of disrespecting international regulatory standards and attempting to mislead the court. "And just when you think the SEC can't sink any lower, if you are a financial regulator outside the U.S. and have done the hard work of establishing comprehensive crypto licensing frameworks, know that the SEC has no respect for you and thinks you are handing out the equivalent of fishing licenses," Alderoty stated in a post on X (formerly Twitter).
The SEC's demand for a $2 billion penalty is based on the millions of profits Ripple allegedly earned from its unregistered sales of XRP. The regulator also criticized Ripple's assurances to the court that it would not violate the law in the future, likening the company's argument to "saying a New York restaurant need not obtain a liquor license because it obtained a fishing license in California."
As the legal battle nears its climax, Judge Analisa Torres of New York will have the final say on the competing claims made by Ripple and the SEC. In a previous ruling last year, Judge Torres determined that some of Ripple's programmatic sales of XRP did not violate securities laws due to a blind bid process in place, while other direct sales to institutional investors were deemed securities.
