Ripple’s recent settlement with the U.S. Securities and Exchange Commission (SEC) could lead to a regulatory gap, according to SEC Commissioner Caroline Crenshaw.
She warned that the agreement may damage the agency’s credibility and enforcement authority, especially as it contradicts earlier legal positions taken by SEC attorneys in the same case.
Settlement criticized for undermining court orders
Crenshaw said the settlement weakened previous court rulings by stating that neither Ripple nor the SEC would challenge the district court’s summary judgment. She noted this effectively nullified the court-imposed injunction and civil penalty without requiring Ripple to admit wrongdoing. Crenshaw argued that the SEC would have no recourse if Ripple resumed selling unregistered XRP tokens to institutional buyers. This, she stated, would contradict the court’s judgment and undermine the significant time and effort the judiciary invested in the case.
The Commissioner further criticized the agency’s decision to return approximately $75 million to Ripple from escrow and dissolve the injunction. She emphasized that this move sent a concerning message to the public about the SEC’s stance on crypto regulation and investor protection.
Concerns over enforcement and legal consistency
Crenshaw warned that accepting a settlement inconsistent with earlier enforcement outcomes could erode the legal foundation of the SEC’s crypto oversight. She added that the agency was walking away from established investor protections without a clear regulatory framework to replace them. Crenshaw stated that any future rule changes would not retroactively excuse violations of existing securities laws, and abandoning those legal standards now only increased confusion.
The Commissioner also voiced concern over the potential long-term impact on regulatory enforcement, noting that the settlement set a precedent for future cases. She argued that such outcomes could allow companies to bypass accountability while continuing operations largely unchanged.
Commissioner Peirce raises industry-wide implications
SEC Commissioner Hester Peirce also queried the terms of the Ripple settlement. She said the SEC’s treatment of the case had resulted in uncertainty in the digital asset market, and it is likely to impact other crypto firms. Peirce maintained that instead of giving rise to innovation, the enforcement-oriented approach adopted by the agency discouraged projects from being undertaken at home and pressed them to establish themselves overseas. She called for increased transparency from the SEC and pressed for clear guidelines from the agency for crypto business. Peirce stressed that regulatory clarity was vital to promote compliance and increasing market potential at the same time minimizing legal ambiguity. Her comments revealed the internal struggle of how SEC should be able to maneuver digital asset regulation in the future.