SEC’s Crenshaw warns Ripple settlement may create regulatory gap

A crypto-skeptical SEC commissioner has taken aim at the agency for issuing a settlement letter that could mark the end of its legal battle with Ripple.

According to Commissioner Caroline Crenshaw, the Ripple settlement—if the court approves it—would strike another blow to the agency’s courtroom reputation, which she says is wearing down from repeated dismissals.

According to a May 8 statement from the SEC, both the Commission and Ripple have asked a New York court to lift the injunction imposed in August 2024 and to refund $75 million of the $125 million currently held in escrow.

“This settlement, alongside the programmatic disassembly of the SEC’s crypto enforcement program, does a tremendous disservice to the investing public and undermines the court’s role in interpreting our securities laws,” she said.

“In the meantime, the settlement joins a line of dismissals that collectively erode the credibility of our lawyers in court who are being asked to take legal positions today contrary to the ones taken just months ago.”

Crenshaw voiced concern over the SEC’s proposed settlement with Ripple, cautioning that it might undermine investor protection and contribute to a lack of clear regulatory oversight in the crypto space.

“The settlement is not in the best interests of the investors and markets that our agency is tasked with serving and protecting. It creates more questions than answers.”

Although Crenshaw’s term as commissioner concluded in 2024, the SEC provides an option for an 18-month extension beyond the official end of a term.

Since President Trump resumed office, the SEC has dismissed multiple cryptocurrency cases and shifted toward a more favorable approach to digital assets.

A judge’s decision in August last year held Ripple liable for a $125 million penalty after ruling that its XRP token qualified as a security in transactions with institutional investors.

James Filan, a former federal prosecutor, pointed out that while the SEC and Ripple have agreed to a settlement, the settlement remains uncertain, with multiple stages still to be completed before the case officially closes.

According to Filan’s May 8 analysis on X, the initial step is for Judge Torres to deliver an indicative ruling to confirm her approval of the settlement letter.

He explained further, noting that if Torres issues an indicative ruling, the SEC and Ripple will seek a limited remand from the Second Circuit Court of Appeals back to her, and if the court approves the request, they will file another motion for the settlement.

“After the injunction is dissolved and the funds distributed, the SEC and Ripple will ask the Court of Appeals to dismiss the SEC’s appeal and Ripple’s cross-appeal. Then it will be over,” he said.

The SEC took legal action against Ripple Labs in December 2020, claiming that the firm had illegally marketed its token as an unregistered security.

A long-time crypto skeptic, Crenshaw had previously voiced dissent against the SEC’s approval of spot Bitcoin ETFs in January. Her recent remarks further emphasize the increasing tension within the SEC regarding its direction in a rapidly shifting regulatory environment.