Main Points:
- Judge Analisa Torres of the U.S. District Court for the Southern District of New York denied Ripple and the SEC’s joint motion for an indicative ruling on their proposed settlement, calling it “procedurally improper.”
- The motion sought to lift a permanent injunction preventing XRP sales to institutional investors and to reduce Ripple’s civil penalty from $125 million to $50 million.
- XRP’s price dropped nearly 6.5% following the ruling, settling around $2.36, while odds for an XRP-spot ETF approval in 2025 remain over 80%.
- Judge Torres emphasized that final judgments typically can be vacated only under “exceptional circumstances” such as newly discovered evidence or fraud.
- Ripple and the SEC must now decide whether to refile under the correct Federal Rule 60(b) procedure or explore alternative legal strategies, potentially delaying any settlement for months.
Background of the Ripple-SEC Dispute
In December 2020, the U.S. Securities and Exchange Commission (SEC) sued Ripple Labs, alleging that its sales of XRP constituted unregistered securities offerings. Over the ensuing years, Ripple achieved key victories, including a March 2024 ruling by Judge Torres that XRP tokens distributed programmatically were not securities, while sales to institutional investors were deemed securities offerings. However, the SEC’s appeal in the Second Circuit kept the legal status of XRP in limbo.
In August 2024, Judge Torres imposed a permanent injunction against XRP sales to institutional buyers and levied a $125 million civil penalty against Ripple. The judgment aimed to enforce securities laws while acknowledging Ripple’s partial legal successes. Nonetheless, both parties have pressured for a negotiated resolution to end years of litigation.
The Joint Motion for an Indicative Ruling
What Was Requested
Earlier in May 2025, Ripple and the SEC filed a joint motion asking Judge Torres for an “indicative ruling”: essentially a pre-approval of settlement terms contingent upon a Second Circuit remand. The proposed agreement would have:
- Vacated the injunction blocking institutional XRP sales
- Reduced Ripple’s penalty from $125 million to $50 million
Procedural Misstep
Judge Torres found that the joint filing improperly attempted to alter a final judgment without following Rule 60(b) of the Federal Rules of Civil Procedure. She noted:
“If jurisdiction were restored to this Court, the Court would deny the parties’ motion as procedurally improper.”
Final judgments can only be vacated under narrowly defined grounds—such as newly discovered evidence, fraud, or other “extraordinary circumstances.” Neither Ripple nor the SEC demonstrated such grounds, and they failed to file the motion under the correct procedural rule.
Market Reaction and ETF Outlook
XRP Price Movement
Following news of the motion’s denial on May 15, XRP’s price plunged approximately 6.5%, touching $2.3551 before recovering slightly to $2.36. This represented a roughly 8% drop from levels earlier in the week.
ETF Approval Odds
Despite the procedural setback, market analysts point to bullish ETF prospects. Polymarket’s implied odds for an XRP-spot ETF approval in 2025 rose from 80% on May 15 to 81% on May 16—a sign of sustained optimism among institutional buyers. However, the SEC’s approval deadlines for pending ETF applications fall between July and October 2025, and any prolonged litigation might push final regulatory decisions later in the year.
Legal Implications and Next Steps
Refiling Under Rule 60(b)
To correct their procedural error, Ripple and the SEC could refile the motion under Rule 60(b), which governs relief from final judgments. They must then demonstrate “exceptional circumstances,” a high bar typically met only when new evidence emerges or when there is proof of misconduct.
Alternative Strategies
If re-filing is deemed too cumbersome or unlikely to succeed, the parties might explore:
- A separate settlement agreement outside court supervision
- Negotiation of a consent decree that avoids vacating the final order
- Continued appeals in the Second Circuit to resolve classification disputes
Each path carries trade-offs: a direct settlement could expedite resolution but leave the August 2024 judgment intact; further appeals would prolong uncertainty; and a consent decree might limit the judiciary’s oversight but require mutual concessions.
Broader Industry Consequences
Regulatory Precedent
The SEC vs. Ripple case has become a bellwether for how U.S. regulators treat programmable token distributions versus institutional sales. A final ruling that XRP is not a security could embolden other projects, while an adverse outcome might chill token launches or force tokenomics redesigns.
Global Impact
International markets are watching closely. In Japan and Europe, regulators have tended toward more permissive frameworks for crypto-assets. Should the U.S. ultimately classify XRP as a security, global issuers may need to re-evaluate compliance strategies, from registration obligations to marketing restrictions. Conversely, a favorable Ripple resolution could accelerate crypto adoption and tokenized asset innovation worldwide.
Conclusion
Judge Torres’s rejection of the Ripple-SEC settlement motion underscores the judiciary’s insistence on strict adherence to procedural rules and the difficulty of modifying final judgments. XRP holders and industry observers face continued legal uncertainty, even as ETF optimism persists. Ripple and the SEC must now decide whether to refile under Rule 60(b), seek alternative dispute mechanisms, or continue appeals—any of which could keep the case active for months to come. The ultimate resolution will shape not only XRP’s market status but also regulatory precedent for cryptocurrencies in the United States and beyond.
