SEC’s Crenshaw Slams Ripple Settlement, Cites ‘Regulatory Vacuum’ Concerns

U.S. Securities and Exchange Commission (SEC) Commissioner Caroline Crenshaw has sharply criticized a proposed settlement between the agency and Ripple Labs, warning that the deal could significantly weaken investor protections and further erode the SEC’s credibility in enforcing crypto regulations.

In a May 8 statement, Crenshaw expressed strong opposition to the terms of the joint settlement letter submitted by the SEC and Ripple in a New York federal court. The letter seeks to dissolve a previous injunction against Ripple issued in August 2024 and return $75 million of the $125 million civil penalty held in escrow back to the crypto company.

Source: James Filan

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

Backlash from Within the SEC

A long-time crypto skeptic, Crenshaw warned that approving this settlement could set a dangerous precedent. She argued that the deal undercuts the legal victory the SEC previously secured, when Judge Analisa Torres ruled that Ripple's XRP token constituted a security when sold to institutional investors—thereby falling under securities laws.

Crenshaw also criticized what she described as a shift in the SEC’s enforcement approach under the current administration, suggesting that the agency has been quietly backing off from aggressive crypto oversight initiated during former Chair Gary Gensler’s tenure.

“We are seeing a slow erosion of our enforcement authority. The increasing number of dismissed cases is beginning to damage our credibility in court,” Crenshaw added.

Source: James Filan

A Settlement Still in Motion

Despite the agreement between the SEC and Ripple, the legal process is not yet complete. According to former federal prosecutor James Filan, several legal steps must be completed before the case is officially closed.

First, Judge Torres must provide an indicative ruling on the proposed settlement. If she signals approval, both the SEC and Ripple will jointly request a limited remand from the Second Circuit Court of Appeals, allowing the case to return to Torres’s courtroom for final resolution.

Once the injunction is formally dissolved and the funds are distributed, both parties are expected to request the dismissal of the SEC’s appeal and Ripple’s cross-appeal—effectively closing the book on the nearly five-year legal battle that began in December 2020.

Wider Implications for Crypto Regulation

The outcome of this case is likely to reverberate across the broader cryptocurrency industry. Critics argue that resolving such a high-profile case through a settlement—after a partial court win—could weaken future regulatory actions and leave a “regulatory vacuum” while Congress and agencies continue to work on a comprehensive crypto framework.

Crenshaw’s statement is a rare public rebuke of her own agency’s legal strategy and highlights the ongoing internal debate within the SEC about how to balance innovation with investor protection in the rapidly evolving digital asset space.