XRP Case Setback: Ripple-SEC Joint Motion Fails to Clear Court’s Procedural Bar

• Judge Torres rejects Ripple-SEC motion to lift XRP injunction and cut civil penalty
• Court cites procedural flaws and failure to show public interest in proposed deal
• Legal experts expect revised motion, new brief required before case returns to appeal

U.S. District Judge Analisa Torres has denied a joint request from Ripple Labs and the Securities and Exchange Commission (SEC) that aimed to change XRP case terms in their ongoing legal case.

The motion, which was originally filed on May 8, sought to remove a permanent injunction on Ripple’s institutional XRP sales and reduce the company’s civil penalty from an initial $125 million down to $50 million.

Judge Torres, however, issued a court order on May 15 rejecting this proposal. Her decision cited procedural deficiencies and a failure by the parties to adequately justify how the proposed changes would serve the public interest. 

The SEC’s attempt to renegotiate settlement terms comes after leadership changes within the agency, including the resignation of former Chair Gary Gensler.

SEC’s Shift in Approach Met with Procedural Scrutiny

Under its new leadership, the SEC has reportedly adopted a different approach to digital asset enforcement, showing a willingness to reduce penalties or resolve high-profile cases such as the one involving Ripple. 

The revised agreement proposed by Ripple and the SEC included dropping the appeal concerning secondary XRP sales and modifying the penalties related to violations from Ripple’s institutional sales.

Related: SEC and Ripple Strike Settlement: What’s Inside the New Deal?

Despite this mutual agreement between the two parties, Judge Analisa Torres refused to approve their request. In her order, she noted that Ripple and the SEC had not met the necessary legal standard required to lift the existing injunction. Furthermore, she found they had not sufficiently explained why modifying the terms would be in the public’s interest, especially considering her earlier findings.

Next Steps: Refiling with Proper Legal Justification Expected

Legal experts suggest that this rejection by Judge Torres stemmed primarily from the incorrect use of court procedure rather than a fundamental denial of the settlement’s potential terms.

According to attorney Fred Rispoli, both Ripple and the SEC failed to apply the appropriate legal rule for their request. He indicated they will now need to refile using the correct legal process.

Pro-XRP attorney John Deaton stated that both parties had sought an “indicative ruling” from Judge Torres. This was to determine if the court would likely approve the revised terms if the case were remanded from an appeal. 

However, the judge’s order clearly pointed out the necessity for a formal briefing. This briefing must outline why lifting the injunction on Ripple’s institutional XRP sales aligns with her earlier court finding that these sales indeed violated securities laws.

Following the court’s decision, Ripple and the SEC must now submit a detailed joint brief that justifies the proposed changes to the settlement. John Deaton estimates that achieving a resolution through this revised process could still take several months. 

Related: Ripple-SEC Deal Looks Real, But Timing Is Weird, Legal Expert Warns

Once Judge Torres receives a new, correctly filed motion and is satisfied with the provided legal rationale, the case is expected to return to the Second Circuit Court of Appeals before any final settlement can be approved.