The two-year XRP lawsuit endgame: what’s left to resolve

The SEC vs Ripple case officially ended on August 22, 2025, with both parties dismissing their appeals at the Second Circuit Court of Appeals. 

The five-year litigation that defined a generation of US crypto regulation is over. What is less widely understood is that Judge Torres’s original ruling, the $125 million civil penalty, and the permanent injunction against direct institutional XRP sales all remained intact. Ripple did not “win” in the way most coverage suggested. The SEC did not “lose” in the way the headlines implied. Both sides walked away because the court refused to let them settle on terms they preferred. Two years later, what is still open includes the legal precedent for similar tokens, the unresolved question of secondary market sales, the lingering operational restrictions on Ripple’s US institutional business, and what CLARITY Act passage would actually change about the framework Torres established. This is what the lawsuit endgame actually means.

What actually ended in August 2025

The factual picture of the lawsuit’s resolution is more nuanced than the headlines suggested at the time, and the nuance matters for understanding what is and is not settled today.

On August 7, 2025, Ripple and the SEC jointly filed to dismiss their respective appeals at the US Court of Appeals for the Second Circuit. On August 22, 2025, the appellate court formally accepted the joint stipulation under Federal Rule of Appellate Procedure 42, bringing the case to its procedural end. The court’s acceptance was concise. The order contained minimal commentary. Five years of litigation closed with a procedural ruling that was, by federal court standards, almost anticlimactic.

But the mechanism of how the case ended is important, because it shaped what was actually resolved. Earlier in 2025, Ripple and the SEC had attempted to formally settle the case. The proposed settlement would have reduced Ripple’s civil penalty from $125 million to $50 million and would have set aside the permanent injunction against violating securities registration requirements. Both parties agreed to the terms. Both parties asked Judge Analisa Torres of the Southern District of New York to approve the settlement.

Judge Torres rejected it.

Her reasoning was procedural but consequential. The court had already entered final judgment in 2024, including the $125 million penalty and the permanent injunction. Modifying those terms after the fact would require setting aside her earlier ruling, which Torres declined to do. The court kept the integrity of its judgment. The settlement died.

Without a viable path to alter the outcome through continued litigation, Ripple and the SEC chose to drop their respective appeals. The case ended not because either side won at the Second Circuit, but because both sides recognized further appellate litigation could not change the underlying judgment. Torres’s 2023 ruling and 2024 final judgment stand as the controlling outcome.

This matters because it means the case did not end with a clean resolution. It ended with both sides walking away from a fight they could no longer profitably continue. The legal precedent that resulted is, in some ways, the precedent neither side originally wanted.

What the Torres ruling actually established

The 2023 Torres ruling is the document that effectively defines XRP’s legal status in the United States, and it is worth being precise about what the ruling did and did not say.

The ruling distinguished between two categories of XRP sales. Programmatic sales (XRP sold on public cryptocurrency exchanges to retail buyers) were determined not to be securities transactions. The court’s reasoning relied on the Howey Test, the standard for determining whether an asset qualifies as a security under US law. Torres concluded retail buyers of XRP on public exchanges did not have a direct relationship with Ripple, could not have reasonably expected profits “from the efforts of others” in the specific way Howey requires, and were not buying XRP as part of an investment contract with Ripple specifically.

Institutional sales (XRP sold directly by Ripple to sophisticated institutional buyers under contractual arrangements) were determined to be securities transactions. The court’s reasoning was that these direct sales involved formal contracts, investment commitments, and an explicit relationship between Ripple and the buyers that satisfied Howey’s investment contract standard. Ripple’s $1.3 billion in institutional XRP sales over the relevant period were therefore unregistered securities offerings.

This is the distinction that has carried forward. XRP on the secondary market is not a security. XRP sold directly by Ripple to institutions is. The framework is unusual because it treats the same underlying asset differently depending on the sales channel and the buyer’s sophistication.

Torres also imposed a $125 million civil penalty on Ripple for the unregistered institutional sales. This was substantially less than the $2 billion the SEC had originally sought, but materially more than the $50 million Ripple later tried to negotiate in the rejected settlement. And she imposed a permanent injunction against Ripple violating registration requirements in future institutional sales.

Both the penalty and the injunction stayed in effect after the appeals were dismissed.

This is the part of the resolution most coverage understates. Ripple did not get the penalty reduced. Ripple did not get the injunction lifted. The institutional sales restriction is still in place. Ripple’s US institutional business runs under a permanent legal restriction the company tried and failed to remove.

For XRP holders, this distinction is largely academic, because the secondary market ruling is what affects their holdings. For Ripple as a business, the institutional sales injunction is a real operational constraint that shapes how the company structures its US institutional offerings even today.

What “the case is over” actually means

With the appeals dismissed and the Torres ruling final, several things became settled at the federal level.

XRP is not a security when sold on secondary markets. Exchanges can list it. Retail investors can buy and sell it. ETFs can hold it. Institutional investors can purchase XRP through ETFs or secondary market transactions without securities law concerns. This is the part of the ruling that has the broadest practical impact, and it is also the part that has held up cleanly through subsequent regulatory developments.

The SEC cannot bring further enforcement actions against Ripple based on the same conduct. The case is res judicata. The agency has no path back into court on these specific allegations.

Ripple is bound by the $125 million civil penalty and the permanent injunction. These are operational realities the company must work around, particularly in how it structures direct sales to US institutional clients.

The SEC also waived Ripple’s “bad actor” disqualification under Regulation D, which would have otherwise barred Ripple from taking part in certain types of private securities offerings as a sanctioned defendant. This waiver was a meaningful concession that lets Ripple keep its broader US regulatory standing. Some legal commentators called the SEC’s waiver “unprecedented” given the underlying findings, and read it as part of the agency’s broader retreat from the enforcement-first approach of the Gensler era.

Brad Garlinghouse and Chris Larsen, individually named as defendants in the original complaint, were also released from civil enforcement actions as part of the joint dismissal. The personal liability questions that had hung over Ripple’s leadership for nearly five years were resolved.

The case being “over” therefore means: no further appellate litigation, the Torres ruling is final, the framework distinguishing secondary from direct institutional sales is the law in the Southern District of New York, and Ripple runs under specific monetary and operational consequences that survived the case’s resolution.

What it does not mean is that XRP’s legal status is fully settled in every jurisdiction or under every potential legal theory. That is the part most coverage misses.

What is still open

The lawsuit’s resolution closed several questions definitively. It left others open. Understanding which is which is the key to understanding what 2026 still means for XRP legally.

The precedent question is not fully resolved. Judge Torres’s ruling is the law in the Southern District of New York for this specific case. It is persuasive authority in other federal courts. But it is not binding precedent at the national level. A different federal judge in a different jurisdiction, faced with a similar token under similar circumstances, could theoretically reach a different conclusion. The Torres framework has held up through subsequent cases (the SEC has dropped several similar enforcement actions in 2025 against Coinbase, Kraken, and others, partly in response to the Ripple outcome), but it has not been formally adopted as binding precedent through Second Circuit or Supreme Court ruling.

This is what the CLARITY Act would change. By codifying the secondary market versus direct sales distinction into federal statute, CLARITY would convert the Torres framework from “persuasive authority in one district” into “binding federal law applicable nationwide.” The legal certainty would be significantly higher than what currently exists.

The institutional sales question still has operational consequences. Ripple’s permanent injunction against violating registration requirements in institutional sales is still in effect. This is not a hypothetical restriction. It actively shapes how Ripple structures its US institutional offerings today. Direct institutional sales of XRP by Ripple in the United States must comply with securities registration requirements, which in practice means Ripple does not do them in their original form. The company has worked around this by structuring its institutional offerings through alternative mechanisms (RLUSD, payment partnerships, banking services) rather than direct XRP sales. The workaround works, but it is a workaround, not a clean resolution.

The state law question is open. The Torres ruling addressed federal securities law. State securities regulators (the “Blue Sky” laws of individual states) have their own frameworks, and the Torres ruling does not directly bind them. New York’s BitLicense regime, California’s Department of Financial Protection and Innovation, Texas’s State Securities Board, and dozens of other state-level regulatory bodies could theoretically take their own positions on XRP. Most have aligned with the federal framework in practice, but the question is not procedurally closed.

The international precedent question is open. US regulators do not control how the UK’s FCA, the EU under MiCA, Japan’s FSA, Singapore’s MAS, or other major non-US regulators treat XRP. Each has its own legal framework. The Torres ruling has no direct binding effect outside the United States. International alignment with the US framework has been mostly favorable to Ripple (the UK, Japan, Singapore, and the UAE have all classified XRP in ways consistent with non-security status), but this alignment is voluntary, not required.

The accountability question is open in a different sense. The SEC’s conduct during the Ripple case has been criticized extensively by legal commentators. SEC Commissioner Caroline Crenshaw’s dissenting statement on the settlement called out concerns about the agency’s inconsistency. The “bad actor” waiver granted to Ripple has been characterized by some as undermining the integrity of the SEC’s broader enforcement framework. None of these critiques have legal force, but they shape the political and institutional landscape in which future SEC actions will be evaluated. A future SEC chair could, in theory, reconsider some of the policy positions the current leadership has taken in the wake of the Ripple resolution.

What CLARITY Act passage would actually change

The CLARITY Act, which has cleared the Senate Banking Committee in 2026 and may pass before year-end, is the legislation most likely to affect XRP’s legal status going forward.

The act would do several things that matter specifically for XRP and the broader Ripple business.

First, it would codify the secondary market versus direct institutional sales distinction into federal statute. The Torres framework, currently persuasive authority in one federal district, would become binding federal law nationwide. This is the single most important legal development for XRP that has not yet occurred.

Second, it would establish clear jurisdictional boundaries between the SEC and CFTC for digital assets. Tokens classified as commodities under CLARITY’s framework would fall under CFTC oversight rather than SEC oversight. XRP, given the existing Torres framework, would almost certainly be classified as a commodity under CLARITY. This shift would resolve any residual ambiguity about which federal agency has primary regulatory authority over XRP-related products, including ETFs, futures, and institutional offerings.

Third, it would provide a federal safe harbor for projects working toward sufficient decentralization. XRP, while operational and widely used, is still partially controlled by Ripple through the escrow holdings and the company’s outsized influence on the XRP Ledger ecosystem. CLARITY’s safe harbor provisions would provide a regulatory framework for the gradual transition to more distributed control, which would benefit both Ripple and the XRP Ledger community.

Fourth, it would constrain the SEC’s ability to bring future enforcement actions against tokens whose classification has been settled under the CLARITY framework. The agency’s “regulation by enforcement” approach, which defined the Gensler era and produced the original Ripple lawsuit, would face statutory restrictions on its use against tokens that meet CLARITY’s commodity criteria.

What CLARITY would not do is alter the existing Torres judgment. The $125 million penalty, the permanent injunction against direct institutional sales by Ripple, and the framework Torres established would all stay in effect as the controlling outcome of the original case. CLARITY’s effect would be prospective: it would shape how future cases are litigated and how the SEC treats future tokens, without disturbing the settled outcome of the Ripple case itself.

This is the part of the CLARITY Act story that gets misreported. CLARITY would not “free Ripple from the injunction” or “void the Torres ruling.” Those outcomes are already settled and would persist regardless of legislative action. CLARITY would change the rules going forward, not retroactively alter what has already been decided.

For XRP holders specifically, CLARITY’s passage would provide the strongest possible federal legal protection of XRP’s status as a non-security on secondary markets. The protection currently exists through judicial precedent. CLARITY would convert it into statute. The difference matters for institutional investors who require statutory certainty rather than judicial interpretation before deploying significant capital.

What this means for Ripple’s business strategy today

The lingering operational consequences of the lawsuit are not theoretical. They are visible in how Ripple structures its US institutional business in 2026.

Ripple does not conduct direct institutional sales of XRP in the United States in the form the original lawsuit found problematic. The permanent injunction makes such sales legally risky. Instead, Ripple has built its US institutional offering around adjacent products and services that achieve similar economic outcomes through different legal structures.

RLUSD, Ripple’s US dollar stablecoin, is one example. RLUSD is not subject to the Torres injunction because it is a stablecoin rather than an investment contract token. Institutional clients can use RLUSD for payment, treasury, and collateral purposes through Ripple’s services without triggering the legal restrictions that constrain direct XRP sales.

Ripple Prime, the company’s prime brokerage service, is another example. Through Ripple Prime, institutional clients can access XRP and other digital assets through brokerage arrangements rather than direct purchases from Ripple. The legal structure is different from a direct sales arrangement.

The Hidden Road acquisition extended this strategy further. Hidden Road, which Ripple acquired in 2024 for over $1 billion, is a prime brokerage that allows institutional clients to access digital asset markets through standard brokerage channels. Hidden Road’s structure is not subject to the Torres injunction.

The Ripple National Trust Bank application is, in part, a response to the same set of constraints. A federally regulated trust bank can custody XRP and provide trust services to institutional clients without conducting direct sales. The banking structure offers a legal framework that achieves institutional client engagement without re-triggering the original case’s legal restrictions.

What this means is that the lawsuit’s resolution did not actually free Ripple to do whatever it wanted with US institutional clients. The injunction is real, and Ripple has built its entire US institutional strategy around working within it. The strategy is sophisticated and successful, but it is constrained in ways that the headlines about “Ripple wins lawsuit” obscure.

For investors evaluating Ripple’s institutional positioning, this matters. Ripple’s success in the US institutional market depends on these workaround structures continuing to function as designed. If a future legal challenge questioned whether RLUSD, Hidden Road, or Ripple National Trust Bank constitute disguised institutional XRP sales, the entire workaround architecture would be at risk. The probability of such a challenge is low, but it is not zero.

What the resolution means for the broader crypto industry

The Ripple case set precedent that has shaped how the SEC treats other crypto enforcement actions in 2025 and 2026.

In February 2025, the SEC dropped its civil enforcement action against Coinbase. The agency cited shifts in policy under the new administration and the broader reconsideration of enforcement-first approaches. The Coinbase dismissal directly followed the patterns established in the Ripple resolution.

The SEC also dropped cases or scaled back enforcement against Kraken, Binance.US, Robinhood Crypto, and several other major crypto firms during 2025. Each case had its own specific factual circumstances, but the broader pattern was consistent: the agency was retreating from the enforcement strategy that produced the original Ripple lawsuit.

For the crypto industry, this collective shift is the practical legacy of the Ripple case. The framework Torres established (secondary market sales as non-securities, direct institutional sales as potentially-securities, Howey Test applied with attention to channel and buyer relationships) has become the de facto operating framework crypto exchanges and projects use to navigate US regulation.

Whether this framework holds up under future legal challenges, whether CLARITY codifies it into statute, and whether a future administration might reverse the SEC’s current posture are open questions. The current state is favorable to the industry. The current state is also reversible.

This is the most important takeaway from the lawsuit’s resolution that does not appear in most coverage. The legal outcome is favorable to crypto, but it is not constitutional. It is judicial precedent in one district, backed by current administrative policy, sustained by the absence of a future enforcement-focused SEC chair. The framework is real and operational, but it is not bulletproof.

CLARITY Act passage would convert the framework from administrative policy into federal law. Without CLARITY, the framework keeps running, but its durability depends on factors (political composition of the SEC, future administrative priorities, individual judicial rulings) not under the industry’s control.

What to actually watch

For readers tracking the long tail of XRP’s legal situation, three things are worth watching over the rest of 2026 and into 2027.

The first is CLARITY Act passage. The bill has cleared the Senate Banking Committee. It needs floor votes in both chambers and presidential signature. If it passes, the Torres framework becomes federal law and XRP’s legal status reaches the highest possible level of certainty under US legal structures. If it fails, the framework keeps running but stays vulnerable to political and judicial reversal.

The second is whether any new federal litigation tests the Torres framework. The SEC has stepped back from enforcement-first crypto litigation in 2025 and 2026, but private securities lawsuits, state-level enforcement actions, or a future federal administration’s approach could theoretically test the framework’s durability. Any case that successfully challenged the secondary market versus direct institutional sales distinction would undermine the broader stability of XRP’s legal status.

The third is how Ripple’s workaround architecture evolves. The Hidden Road acquisition, the RLUSD stablecoin, the Ripple National Trust Bank application, and Ripple Prime are all responses to the lingering institutional sales injunction. If these structures keep working and growing, Ripple’s US institutional business proceeds as designed. If any of them face legal challenges, the broader strategic position becomes more fragile.

The bottom line

The Ripple lawsuit ended in August 2025. It did not end the way most coverage suggested. Ripple did not win a clean victory. The SEC did not suffer a clean defeat. Both parties walked away from a fight neither could profitably continue, leaving Judge Torres’s 2023 ruling and 2024 final judgment as the controlling outcome.

What was resolved: XRP is not a security when sold on secondary markets. The SEC cannot bring further actions against Ripple based on the original conduct. The case is procedurally closed.

What was not resolved: the $125 million civil penalty against Ripple stayed in effect. The permanent injunction against direct institutional XRP sales by Ripple stayed in effect. The legal framework Torres established is binding in one federal district and persuasive elsewhere, but not yet codified into federal statute. State law questions, international jurisdictional questions, and the broader question of how future crypto regulation evolves are all still open.

What is genuinely settled is the operational reality for XRP holders. XRP can be bought, sold, traded, and held in the United States as a non-security on secondary markets. ETFs can hold XRP. Institutional investors can access XRP through standard market channels. The everyday legal status of the token, for the vast majority of users, is clear.

What is genuinely unsettled is the underlying durability of the framework. The Torres ruling is judicial precedent, not statute. CLARITY Act passage would convert it into law. Without CLARITY, the framework stays vulnerable to political reversal, judicial reinterpretation, or selective enforcement under future administrations. The protection is real but it is administrative, not constitutional.

For Ripple as a business, the lingering operational consequences of the lawsuit are substantial. The institutional sales injunction shapes how Ripple structures its US offerings even today. The banking license strategy, the acquisition program, the RLUSD stablecoin, and the broader institutional infrastructure play are all responses to a legal constraint the company tried and failed to remove through settlement.

The two-year endgame of the XRP lawsuit therefore left the industry with a paradox. The case is over. The framework is in place. The operational reality is favorable. And yet the underlying legal foundation is less secure than the headlines suggested, and the work of converting judicial precedent into durable statute is the next chapter XRP holders should be tracking.

The lawsuit ended. The legal questions it raised are still being answered.

This article is for informational purposes and does not constitute legal or investment advice. Securities law interpretations and regulatory developments evolve quickly; the legal analysis described reflects reporting and case documentation available as of late May 2026. Always do your own research and consult appropriate legal counsel for specific legal matters.