The settlement application submitted by Ripple and the U.S. Securities and Exchange Commission (SEC) to the federal district court on the 16th was rejected on the grounds of procedural impropriety.

The lawsuit began in December 2020, when the SEC accused Ripple of conducting unregistered securities sales, and the two sides have been arguing over this issue for nearly four and a half years.

The SEC filed a lawsuit against Ripple, alleging that it conducted unregistered securities transactions worth $1.3 billion through XRP (Ripple currency).

Background and legal issues surrounding the rejection of the settlement proposal

The two parties filed for a settlement on May 8, which included the revocation of the "injunction against Ripple for illegal securities sales" and a significant reduction in the fine from $125 million to $25 million.

However, U.S. District Court Judge Annalisa Torres noted that the parties were not applying for "formal settlement approval" but rather had to follow proper legal procedures in accordance with the Federal Rules of Civil Procedure. She stressed that "lifting the ban and significantly reducing the fine cannot be approved unless there are extremely special circumstances", and therefore rejected the application.

In its July 2023 ruling, the court found that Ripple's sales of XRP to institutional investors violated securities laws, while transactions to general investors did not constitute securities.

After the settlement proposal was rejected, the future regulatory direction of institutional investors' investment in crypto assets (virtual currencies) remains a focus of attention.

Impact on the market and industry and future prospects

Affected by this rejection decision, the price of XRP fell 3% during the day and fluctuated around $2.344 before the deadline. Market concerns are growing about the protracted litigation and the regulatory trends surrounding virtual currencies.

The court specifically emphasized that this decision did not overturn a favorable 2023 ruling that small transactions of XRP were not securities.

In the future, the legal form of the settlement process and the establishment of a new cryptocurrency regulatory framework will become key issues.

Ripple General Counsel: Will not change the non-securities verdict

“Today’s order does not change Ripple’s victory that XRP is not a security. It is merely a procedural matter concerning the dismissal of Ripple’s cross-appeal,” said Ripple general counsel Stuart Aldrotti.

Ripple still maintains its position that XRP is not a security and is considering how to resolve the procedural issues.

According to Aldrotti, “Ripple and the SEC have fully agreed to resolve this litigation through a settlement and will review the relevant matters with the court.”

The progress of this lawsuit and the direction of US cryptocurrency regulation will continue to receive widespread attention in the future.