A federal judge has dealt a significant blow to Ripple Labs and the U.S. Securities and Exchange Commission (SEC), rejecting their joint motion to dissolve a 2024 final judgment that imposed $125 million in civil penalties and a permanent injunction on Ripple for selling XRP to institutional investors without proper registration. The ruling, issued on June 26, 2025, by U.S. District Judge Analisa Torres, underscores the court's refusal to allow the two parties to bypass appellate review through a private settlement agreement.
Background of the Case and the Settlement Attempt
The legal battle stems from the SEC's 2020 lawsuit against Ripple, accusing the company of conducting an unregistered securities offering through XRP sales. In 2024, Judge Torres delivered a split ruling: she found that Ripple's programmatic sales of XRP on exchanges did not constitute securities transactions, but its direct sales to institutional investors did violate Section 5 of the Securities Act. The court imposed a $125 million civil penalty and issued a permanent injunction barring Ripple from future violations. Both parties appealed, but in a surprising move earlier in 2025, they jointly asked the district court for an "indicative ruling" that would allow them to vacate the final judgment, significantly reduce the penalty, and lift the injunction. The SEC had originally sought nearly $1 billion in fines before agreeing to the reduced amount.
Judge Torres's Reasoning
In her order, Judge Torres firmly rejected the motion, stating: "The parties' motion for an indicative ruling is DENIED." She emphasized that a final judgment is binding and cannot be undone merely because the parties later agree to a different outcome. "The Court respects the freedom of parties to amicably resolve their disputes. It is also true that the SEC, like any other law enforcement agency, has discretion to change course after an enforcement action is initiated," she wrote. "But the parties do not have the authority to agree not to be bound by a court's final judgment ... the parties must show exceptional circumstances that outweigh the public interest or the administration of justice ... They have not come close to doing so here."
The judge noted that Ripple had argued it had reformed its practices and intended to comply with the law moving forward. However, she found that such claims did not meet the high legal threshold required to set aside a final judgment. Only an appellate court has the power to vacate a district court's final ruling, and the proper avenue for relief is through the ongoing appeals process, not through a post-judgment settlement that the court itself must endorse.
Implications for XRP and Crypto Regulation
The decision has immediate market consequences. XRP's price exhibited increased volatility following the announcement, with traders reassessing the likelihood of a swift resolution. Legal commentators note that the ruling reinforces the independence of the judiciary in securities enforcement – even when both plaintiff and defendant agree on a settlement, the court's final judgment remains sacrosanct unless overturned on appeal.
The SEC's willingness to settle with Ripple had raised questions about its enforcement priorities. However, Judge Torres's refusal suggests that the court will not serve as a rubber stamp for negotiated outcomes when a final judgment has already been entered. This could set a precedent for other crypto cases where the SEC and defendants might attempt to settle after a final ruling. It also means Ripple will likely have to continue its appeal before the Second Circuit Court of Appeals, prolonging the uncertainty that has surrounded XRP's regulatory status for years.
Neither Ripple nor the SEC has commented on the ruling yet. The XRP community remains divided: some see the rejection as a setback that will delay clarity, while others view it as an opportunity to achieve a definitive legal victory through higher courts. Regardless, the case remains a landmark for how U.S. courts treat digital asset securities and the limits of regulatory settlements.