Ripple (XRP) Skyrockets 20% After Court Imposes $125M Penalty, Appeal Possible

On Wednesday, a federal judge brought the long-pending Securities and Exchange Commission (SEC) court battle to a close, imposing a $125 million

A federal judge on Wednesday brought the Securities and Exchange Commission’s long-pending court battle to a close, slapping a $125 million penalty on Ripple. The penalty is much closer to Ripple’s bid than the $2 billion the SEC had sought — causing the price of XRP to skyrocket over 20%.

Ripple executives and other crypto spectators hailed the ruling as a key victory. However, CapSign founder Matt Rosendin predicted that Ripple will likely appeal the court decision.

Here's why:

Despite the financial win, Judge Analisa Torres also imposed an injunction against Ripple, enjoining the company to refrain from violating securities laws in the future. In her decision, Torres pointed to Ripple’s “willingness to push the boundaries” of the law after the SEC lodged its initial lawsuit, contending that there is a likelihood the company will eventually “cross the line”.

CapSign's Matt Rosendin suggested that this injunction forces US institutions to buy XRP from the market—rather than at a discount directly from Ripple—in his view, presenting adoption hurdles for the On-Demand Liquidity service and XRP liquidity in the US markets.

Notably, he still thinks that Ripple does not need to sell XRP directly to US institutions to be successful. Rosendin has also noted that Ripple can sell XRP tokens to institutions, but it will need a federal securities exemption.

“Such sales are exempt from SEC registration provisions,” he noted, adding:

“The only practical exemption Ripple can claim is Regulation A, but that limits XRP sales for ODL to $75m per year, which is not ideal at all.”

While the case has now reached its end, there is also speculation that the SEC could appeal Torres' historic ruling from July 2023—potentially extending the legal proceedings. Last year, Ripple notched a partial victory in its legal brawl against the SEC after she found that Ripple's institutional sales of the XRP token—and not sales to retail investors via exchanges—qualified as unregistered securities offerings.

The top Wall Street regulator initially sued Ripple for violating securities law in late 2020, leading to the XRP price crash and several crypto exchanges and major partners cutting ties with the company and its coin.

XRP ETF Is The Solution

The only solution to this institutional sales conundrum, according to Matt Rosendin, is an XRP exchange-traded fund. He proposed an XRP ETF that Ripple can sell over the counter with institutions on the XRP Ledger. However, the pundit noted that Ripple would need an ATS license to carry out those secondary sales.

Overall, with the legal uncertainty regarding XRP's retail sales now resolved, there is growing anticipation for XRP to secure a spot ETF on Wall Street. Such a product would allow institutional investors to gain exposure to XRP without holding the asset directly. Earlier this year, Ripple CEO Brad Garlinghouse claimed that an XRP ETF was bound to happen and that it was only a matter of time before the Securities and Exchange Commission greenlighted many other crypto assets for similar fund offerings.

A potential XRP ETF would pave the way for new investment avenues, significantly boosting the seventh-largest crypto's visibility and presence in the financial sector.

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