U.S. Securities and Exchange Commission (SEC) Commissioner Caroline A. Crenshaw has expressed strong opposition to the agency’s recent settlement with Ripple Labs, warning that it undermines investor protections and weakens the SEC’s approach to crypto enforcement.
The controversy stems from a legal battle that began in December 2020 when the SEC sued Ripple for raising capital through the sale of XRP tokens without registering them as securities, allegedly violating Section 5 of the Securities Act of 1933. While a court had partially ruled against Ripple, determining that the company’s institutional sales of XRP constituted unregistered securities offerings, it found that other secondary sales did not.
The newly announced settlement requires Ripple to pay over $125 million in penalties, but it also returns $75 million in escrowed funds to the company and vacates the injunction that had restricted future XRP sales.
However, Commissioner Crenshaw, in a sharply worded dissent, strongly criticized the deal, stating that it “razes” both the civil penalty and the injunction, effectively nullifying the court’s prior ruling. “This is not a settlement I can support. It subverts the clear and honest application of the facts to the law… and does a tremendous disservice to the investing public,” she said.
Crenshaw’s Concerns:
Crenshaw raised three major concerns regarding the settlement:
Judicial Undermining: The settlement nullifies the court’s injunction, potentially allowing Ripple to sell unregistered XRP again without facing consequences.
Regulatory Vacuum: Crenshaw warned that this settlement represents a broader shift by the SEC away from enforcing crypto regulations, with no clear framework to replace it.
Investor Risk: The Commissioner expressed concern that the deal raises more questions than it answers, especially when it comes to investor protections and market clarity.
Crenshaw also voiced fears that the SEC was attempting to “gut its own enforcement program from the inside out,” prioritizing deregulation over upholding legal precedents. She called on the courts to scrutinize the settlement more closely, warning that such decisions could damage public confidence in the SEC’s integrity and mandate.
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