Last week, a federal judge ruled that Ripple should pay $125 million after finding last year that the company had violated federal securities laws with its direct sales of XRP to institutional clients. It’s a fraction of the $2 billion that the SEC sought, and – for now anyway – ends the long-running case that began around Christmas 2020.

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SEC v. Ripple is nearly four years old. Now it’s over. Maybe.

The case was among the first major protracted ones between the U.S. Securities and Exchange Commission and a crypto industry player. Previous SEC cases against companies like Kik and Telegram ended relatively quickly. Ripple fought, and the results will be dissected as the industry looks at the SEC’s ongoing cases against exchanges and other crypto companies.

To quickly recap: The SEC sued Ripple in late December 2020, alleging Ripple sold XRP in violation of securities laws. The suit worked its way through the Southern District of New York court until July 2023, when Judge Analisa Torres ruled that while Ripple had violated federal securities laws in how it sold XRP directly to institutional clients, the company hadn’t violated any laws through its selling XRP to exchanges which then made the token available to retail clients. The SEC unsuccessfully tried to file for an interlocutory appeal on portions of this decision, and in October it dropped charges against CEO Brad Garlinghouse and Chairman Chris Larsen. Last week, the judge ruled that Ripple should pay $125 million in fines and imposed an injunction against breaking the law in the future.

While it might seem it’s the kind of ruling that lets both the SEC and Ripple claim a win – $125 million is well over the $10 million Ripple argued it should pay, and is a small fraction of the nearly $2 billion the SEC sought, counting both last week’s penalties and last year’s ruling on secondary transactions, Ripple is the clear winner.

In fact, an SEC spokesperson did claim victory, saying the ruling contained “significant civil monetary policies totaling more than 12 times the amount Ripple suggested was appropriate.”

“As the Court found, the fact that Ripple has shown a ‘willingness to push the boundaries of the [Court’s summary judgment] Order evinces a likelihood that it will eventually (if it has not already) cross the line,'” the statement said. “The Court also addressed ‘the egregiousness of Ripple’s conduct’ and noted that ‘there is no question that the recurrent, highly lucrative violation of Section 5 is a serious offense.’ As court after court has stated, the securities laws apply when firms offer and sell investment contracts, regardless of the technology or labels that they use.”

The SEC did not say in its statement if it would appeal the July 2023 ruling.

Stuart Alderoty, Ripple’s chief legal officer, said the ruling not only signals the end of the case, but “because the judge continued to reject the SEC’s overreach.”

“[The judge] reminded the SEC, there were no allegations of fraud, there were no allegations of market manipulation, no misappropriation of funds, there were no victims,” he said.

Patrick Daugherty, who heads Foley and Lardner’s digital assets practice, told CoinDesk via email that while both parties lost motions they may want to appeal, the ruling on secondary trades – which favored Ripple – is perhaps the most significant.

“It’s a key loss for the SEC because it takes the wind out of the SEC’s sails in other cases where tokens are trading on exchanges, especially if they’ve been trading there for years,” Daugherty said.

Another attorney, who asked not to be named, said they could see the SEC appealing that specific portion of the July 2023 ruling, calling it a “significant loss” for the regulator.

The penalties themselves are fairly straightforward. The $125 million is something Ripple can easily cover, Alderoty said. Both he and the attorney speaking on background noted that the judge did not find any of the institutional investors had been specifically harmed.

“[Judge Torres] found those parties got exactly what they bargained for, so one kind of has to ask why did the SEC put Ripple to the task of having to defend the suit at a cost of over $150 million?” Alderoty asked.

That may lead to a bad precedent for the SEC, the other attorney said, because it may become more difficult for the regulator to argue for large judgements tied to registration violations in an effort to deter potential future violations.

The injunction the judge imposed is also unlikely to be a big deal. Alderoty called it an “obey the law injunction,” tied to the violation found in selling XRP to institutional investors.

Foley and Lardner’s Daugherty said there’s “no real guidance” in the injunction, which is a procedural one courts often impose. In this case, while the judge said Ripple’s On-Demand Liquidity service may come close to the line of violating federal laws, she didn’t rule that Ripple had violated the law with it or whether ODL needed to be exempt from registration.

“Ripple Labs needs to avoid selling XRP the one way that the court held to be unlawful: as an institutional placement that did not comply with the requirements for an SEC registration exemption,” he said. “This means that Ripple Labs can continue to sell XRP in ways that do comply, either because the offerings are off-shore or because private placement norms are satisfied.”

If the SEC does choose to appeal – or, for that matter, if Ripple decides to appeal its (less significant) loss in the institutional sales portion – it’ll have 60 days from the ruling’s publication to file a notice.

It would be more difficult for the SEC to try and appeal any of the remedies ruling (the ruling that contained the $125 million fine).

Alderoty, the Ripple legal chief, said he wouldn’t advise an appeal if he was working with the SEC.

“I think the finality of the judgment, hopefully people won’t be distracted by if the SEC is going to appeal, what happens if they appeal,” he said. “… even if they do appeal, I would just tell everyone ‘take a deep breath.'”

The attorney CoinDesk spoke to said they would put money on the SEC appealing anyway, given the ruling on secondary transactions is “bad precedent” for the regulator. And while the SEC has taken a few high-profile losses in court, it’s also had a number of equally high-profile wins, like the LBRY case.

“I think there’s an interesting perception where you talk to people and they’re like, ‘oh, the SEC is just taking one loss after the other,’ and that’s not necessarily true, because there have been wins in there too,” they said. “But I do think – their strategy of ‘everything is a security’ … we’re seeing major holes in that strategy that clearly doesn’t seem sustainable.”

Should the SEC appeal, Ripple’s Alderoty said the regulator would have a long road, given how rarely appeals courts overturn district court judges.

While this case so far has been a major win for Ripple, less clear is if it’s also providing clarity for the crypto industry at large.

Christopher LaVigne, a partner at Withers, said the way court decisions have been coming out piecemeal are not providing real clarity for the industry the way companies have asked for.

The decisions that have come out from the courts so far haven’t effectively moved the needle, he said.

Regulators are telling companies to obey the law, companies say they are obeying the law, and a court may rule in either direction.

“Where does that actually get you?” he asked. “That’s pretty much the status quo.”

This week

Next week I’ll be at the SALT Wyoming Symposium, alongside my colleague Helene Braun. Say hi if you’re around.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!