What was the SEC vs Ripple lawsuit about?

The full answer

What did the SEC claim?

The SEC filed its case against Ripple in the US District Court for the Southern District of New York on December 22, 2020, under case number 1:20-cv-10832 [2]. It alleged that Ripple conducted a $1.3 billion unregistered securities offering, as PYMNTS reported on August 7, 2025 [1]. The case was about Ripple’s sales of the XRP token [1]. For where XRP and Ripple came from before the case, see the history of XRP.

Its “fair notice” defence pointed to “the SEC’s failure to issue guidance on digital assets and its inconsistent statements.”[8] The court rejected that defence for the institutional sales.[8] ## What did the court decide in July 2023? Judge Analisa Torres split Ripple’s XRP sales into groups and tested each one.[8] Institutional Sales were direct sales under written contracts to buyers such as institutions, hedge funds and ODL customers, worth about $728.9 million by the SEC’s count.

In July 2023 the judge ruled that Ripple’s sales of XRP on public exchanges did not meet the legal definition of a security. The same ruling found that Ripple’s sales to institutional investors should have complied with securities laws [1]. The reasons for that split are set out in why XRP sales to institutions were treated differently. What the lawsuit meant for exchange listings at the time is a separate question, answered in why exchanges froze or delisted XRP during the lawsuit.

The lawsuit asked one question: did Ripple break US securities law by selling XRP without registering the sales with the Securities and Exchange Commission (SEC)?

In May 2015 the Financial Crimes Enforcement Network (FinCEN) fined Ripple Labs and a subsidiary $700,000 for “selling its virtual currency, known as XRP, without registering with FinCEN” as a money services business.[6] That case was about anti-money-laundering rules, not securities law.

Programmatic Sales were sales on trading platforms through trading algorithms, about $757.6 million, also by the SEC’s count.

The court held that XRP, “as a digital token, is not in and of itself” an investment contract. It found that the Institutional Sales were unregistered sales of investment contracts in violation of Section 5 of the Securities Act. The Programmatic Sales, the Other Distributions and the two executives’ exchange sales were not.[8] The court also said it “does not address whether secondary market sales of XRP” are investment contracts, “because that question is not properly before the Court.”[8] The reasoning behind the split is set out on why XRP sales to institutions were treated differently.

On July 31, 2023, Judge Rakoff ruled in the SEC’s case against Terraform Labs. According to a client alert by the law firm Morrison & Foerster, he “declined to distinguish between investors who purchased tokens directly from defendants and those who obtained their tokens through secondary transactions,” writing that "Howey makes no such distinction between purchasers.

What was the SEC’s strongest argument, and which parts did the court accept?

According to PYMNTS, the SEC alleged that Ripple conducted a $1.3 billion unregistered securities offering [1]. According to PYMNTS, the court accepted that claim for Ripple’s sales to institutional investors and rejected it for Ripple’s sales on public exchanges [1]. The district court’s final judgment of August 7, 2024 imposed a civil penalty of $125,035,150, held in an escrow account, and an injunction against Ripple, according to the SEC [2]. The SEC described that injunction as prohibiting Ripple from violating the registration provisions of the Securities Act of 1933, PYMNTS reported [1]. The SEC’s complaint and the July 2023 opinion were not reviewed for this page, so it does not compare the SEC’s individual legal arguments.

What happened after the final judgment?

Ripple and the SEC both appealed [1]. On May 8, 2025 the SEC announced a settlement under which the two sides would jointly ask the district court to dissolve the injunction and release the escrow, with $50 million paid to the SEC and the remainder to Ripple [2]. The SEC said its decision to resolve the case rested on reforming its approach to the crypto industry, not on any assessment of the merits of the claims [2].

The judge rejected the joint motion, saying Ripple and the SEC could withdraw their appeals or appeal the injunction [1]. In a litigation release announcing a joint stipulation to dismiss the appeals, the SEC said the $125 million fine and the injunction remain in effect after the dismissal, as PYMNTS reported on August 7, 2025 [1]. The penalty figures are broken down in how much Ripple had to pay the SEC, and the end of the case is covered in whether the SEC vs Ripple case is over.

The SEC added that the final judgment “will remain in effect.”[5] What remains in force, and why both sides dropped their appeals, is on whether the SEC vs Ripple case is over.

Why did the SEC wait until December 2020 to sue?

As of October 1, 2026, no public source we found gives the SEC’s reasons for filing in December 2020 rather than earlier. The sources checked were the SEC’s litigation release of May 8, 2025 [2], the PYMNTS report of August 7, 2025 [1] and Ripple’s statement of September 15, 2026 [3]. The question is logged as a research gap.

The SEC announced on November 16, 2020 that Chairman Jay Clayton would “conclude his tenure at the end of this year.”[7] No SEC statement explaining the filing date was found in SEC press releases searched on September 29, 2026, and this page draws no motive from the dates.

What happened to the charges against Brad Garlinghouse and Chris Larsen?

According to the court docket, the parties filed a stipulation on October 20, 2023 dismissing the action against Garlinghouse and Larsen with prejudice, and a second stipulation on October 23, 2023 dismissed the aiding and abetting claims about the Institutional Sales with prejudice, with neither side paying the other’s costs or fees.[9] Neither executive was found liable.

How does Ripple describe the outcome, and what cuts against that account?

On 15 September 2026 Ripple wrote that in 2023 it “secured a landmark victory establishing that XRP is not a security” [3]. Ripple said in the same statement that it spent more than $150 million fighting for legal clarity in court [3]. Ripple also said that in March 2026 the SEC and CFTC issued a joint interpretation naming XRP a digital commodity [3]. That interpretation is Ripple’s own report, and it was not checked against the agencies’ documents.

The public record reviewed here is narrower than Ripple’s summary. The July 2023 ruling, as PYMNTS reported it, was about Ripple’s sales of XRP, and it found that sales to institutional investors should have complied with securities laws [1]. The penalty and the injunction stayed in effect after the appeals were dropped, according to the SEC [1]. The SEC also said its decision to resolve the case does not necessarily reflect its position on any other case [2]. Whether the ruling reaches other courts or other tokens is examined in whether the Ripple ruling binds others. The status of XRP itself is the subject of is XRP a security, and the questions still open after the lawsuit are set out in what is still unresolved now that the lawsuit is over.