Ripple Labs is pushing back against a staggering $1.95 billion fine proposed by the U.S. Securities and Exchange Commission (SEC), arguing that a more reasonable civil penalty should be no more than $10 million. This legal battle comes after the court identified violations of federal securities laws by Ripple through institutional sales of its XRP token.
Legal Standoff Between Ripple and the SEC
The opposition filed by Ripple on Monday in a New York court comes as a critical response to the SEC’s demands, which include $876 million in disgorgement, $198 million in prejudgment interest, and an $876 million civil penalty. The total demand by the SEC amounts to nearly two billion dollars. Ripple’s resistance to this proposal highlights a significant clash over the penalties deemed appropriate for the violations noted.
The court previously dismissed several of the SEC’s allegations, including claims that Ripple’s sale of XRP on exchanges and through automated algorithms violated securities laws. Legal team of Ripple criticized the SEC’s extensive penal demands given the partial dismissal of their claims, accusing the agency of administrative overreach and challenging the basis of the requested disgorgement and penalties.
Ripple’s Argument Against Disproportionate Fines
Ripple’s attorneys argue that the SEC’s request for penalties far exceeds precedents set in similar digital asset cases. They highlighted that the SEC’s demands are “20 times what it has obtained from any other defendant or respondent in a digital-asset case.” Moreover, Ripple contends that there were no gains to disgorge, as evidenced by redacted details of Ripple’s revenue from institutional sales, the income taxes paid, and its reported losses.
The Path Forward
As the case progresses, the outcome will have significant implications not only for Ripple but for the broader cryptocurrency market, particularly regarding how securities laws are applied to digital assets. The court’s decision will either uphold Ripple’s call for a reduced penalty or grant the SEC’s substantial financial sanctions, setting a precedent for future regulatory actions in the crypto space.
The dispute between Ripple and the SEC over appropriate penalties underscores the ongoing regulatory challenges facing the cryptocurrency industry. Ripple’s pushback against the SEC’s hefty fine proposal highlights the broader debate over the extent of regulatory reach and the application of securities laws in the evolving digital asset landscape.
