The legal battle between Ripple Labs and the United States Securities and Exchange Commission (SEC) has taken an unexpected turn. This follows after the SEC went back on its initial settlement demand of a whopping $2 billion to $102.6 million. While this seems too good to be true, Ripple must now decide to either accept the mouth-watering offer and live with its consequences or stand its ground by damning any outcomes.
Regulator Cites Peculiarities of Ripple vs. SEC Case
The initial $2 billion penalty was deemed outrageous by many in the crypto industry. However, Ripple soon followed with a $10 million counteroffer, citing the SEC’s history of smaller settlements and the recent case of Terraform Labs.
According to Ripple, the SEC has never asked for a settlement that exceeded between 0.6% and 1.8% of the defendant’s revenue. The firm also noted that Terraform, responsible for the collapsed Luna coin, settled for $4.4 billion, which included returning funds to investors and ceasing operations, conditions not applicable to Ripple.
Again, the SEC filed a counterclaim, arguing that Terraform’s collapse influenced the settlement. The regulator noted the differences, starting with the fact that Ripple “remains operational” and hasn’t agreed to similar terms. Overall, the SEC believes that its revised settlement amount of $102.6 million is good enough to prevent other firms from future misconduct in the crypto industry.
Financial Relief At the Expense of Clarity
Notably, Ripple will have a tough time making a decision about the presented settlement offer. For what it’s worth, accepting it immediately eases its financial troubles and potentially signifies a desire for regulatory cooperation. However, a major problem persists: XRP’s legal status as a security would remain unresolved. Expectedly, this lack of clarity could make institutional investors lose interest in the XRP, ultimately impacting its market performance.
Also, rejecting the offer poses another risk in what might soon become an unending legal tussle. Considering the financial implications of such a lengthy court battle, whose outcome is also unpredictable, Ripple might have to spend a lot more than the current settlement. That is especially true in the event that a judge imposes a much harsher penalty after finding Ripple on the wrong side of the law.
Whatever happens in the Ripple vs. SEC case, the final settlement amount, whether $102 million or a negotiated figure, is expected to set a precedent for future SEC enforcement actions in the crypto space.
