The U.S. Securities and Exchange Commission (SEC) dropped its appeal against Ripple Labs in March 2025
, marking a significant development in a legal battle that began in December 2020. This decision came despite Ripple maintaining an active cross-appeal, prompting speculation about the SEC’s motivations. While the exact reasons remain speculative due to limited official statements, several factors likely contributed to this outcome based on the broader context of the case and recent regulatory shifts.
One key factor appears to be the changing political and regulatory environment under the second term of President Donald Trump, which began in January 2025. Trump’s administration has adopted a pro-crypto stance, evidenced by actions such as nominating Paul Atkins—a lawyer viewed as crypto-friendly—as SEC chair and appointing David Sacks as a White House AI and crypto czar. This shift contrasts sharply with the SEC’s aggressive enforcement approach under former Chair Gary Gensler, who led the agency during the initial lawsuit against Ripple. Since Trump’s inauguration, the SEC has retreated from multiple crypto-related cases, including those against Coinbase, Kraken, and Consensys, suggesting a broader policy pivot away from litigation-heavy oversight of the cryptocurrency industry. Dropping the Ripple appeal aligns with this trend, possibly reflecting a directive to de-escalate conflicts with crypto firms.
Another potential reason is strategic negotiation. Attorney Fred Rispoli, a pro-XRP legal expert, suggested that the SEC’s decision could be part of a settlement strategy. With Ripple’s cross-appeal still active, the SEC might have sought to resolve the case by encouraging Ripple to drop its appeal in exchange for concessions, such as reducing the $125 million fine imposed by Judge Analisa Torres in August 2024 or lifting the permanent injunction on Ripple’s institutional sales. Ripple’s leadership, including CEO Brad Garlinghouse, has argued that the company should not face penalties, asserting that the SEC’s original lawsuit was misguided—a view Garlinghouse claimed was shared by current SEC leadership. This negotiation angle could indicate the SEC’s willingness to compromise rather than risk an unfavorable appellate ruling that might further weaken its regulatory authority over crypto.
The SEC’s appeal, filed in October 2024, challenged Torres’ 2023 ruling that Ripple’s programmatic sales of XRP on exchanges did not constitute securities violations, though institutional sales did. The agency argued this distinction misapplied the Howey Test, which defines an investment contract. However, Ripple’s cross-appeal countered by asserting that XRP sales lacked the essential contractual elements of a security, aiming to overturn the fine and institutional sales ruling entirely. The SEC may have assessed that pursuing its appeal risked a Second Circuit decision reinforcing Torres’ ruling—or worse, endorsing Ripple’s broader argument—potentially setting a precedent that could limit its jurisdiction over digital assets. Withdrawing the appeal might have been a calculated move to avoid this outcome, especially given the agency’s recent string of litigation setbacks.
Additionally, Ripple’s growing political influence could have played a role. The company donated heavily during the 2024 election cycle, including $45 million to the Fairshake super PAC and $5 million in XRP to Trump’s inauguration fund. This financial clout, combined with a more favorable administration, may have pressured the SEC to reconsider its stance, though no direct evidence confirms this.
Despite the SEC’s withdrawal, Ripple has not yet dropped its cross-appeal as of March 22, 2025, suggesting it intends to pursue a full victory, possibly eliminating the fine and restrictions entirely. Garlinghouse hailed the SEC’s decision as a “resounding victory” for Ripple and the crypto industry, while Chief Legal Officer Stuart Alderoty noted it positioned Ripple “in the driver’s seat” to shape the case’s conclusion. The SEC has declined to comment officially, leaving room for interpretation.
In summary, the SEC likely dropped its appeal due to a mix of a shifting regulatory landscape favoring crypto, potential settlement negotiations, the risk of an adverse appellate ruling, and Ripple’s political leverage. While Ripple’s active cross-appeal continues, the SEC’s retreat signals a possible end to this four-year saga, though the final resolution remains pending.