Ripple’s $125 Million XRP Penalty Rests on Institutional Sales Ruling

Ripple Labs Inc.’s $125,035,150 civil penalty survived the end of its SEC case because a federal judge treated its direct XRP sales to institutions differently from its sales on exchanges.

The distinction turned on the circumstances of each transaction. U.S. District Judge Analisa Torres found in July 2023 that Ripple’s institutional sales were unregistered investment contract transactions. She reached a different conclusion for the programmatic exchange sales examined in the case.

Institutional buyers contracted directly with Ripple. Torres found that they could reasonably expect profits tied to Ripple’s work to develop uses for XRP and strengthen its market. That expectation was central to her application of the Howey test, which determines whether an arrangement is an investment contract.

Exchange orders did not tell buyers whether they were purchasing from Ripple or another holder. On the record before her, Torres did not find the same expectation that Ripple’s efforts would drive profits. Her ruling covered those programmatic sales; it did not settle the legal treatment of all secondary-market XRP trades.

The SEC filed the case on Dec. 22, 2020, alleging that Ripple and two executives had raised more than $1.3 billion through an unregistered offering that began in 2013. That allegation described the scale of the agency’s case. It was not the figure used to calculate the eventual penalty.

The agency sought a $876,308,712 civil penalty, another $876,308,712 in disgorgement and $198,150,940 in prejudgment interest. In an Aug. 7, 2024, order, Torres denied disgorgement and interest and set a $125,035,150 penalty based on 1,278 institutional sales transactions. She also issued a permanent injunction against further violations of the Securities Act’s registration provisions.

The parties later sought to change the judgment. In May 2025, they proposed reducing the payment to $50 million and ending the injunction. Torres rejected their request on June 26, finding that they had not established grounds to alter the final judgment.

The SEC and Ripple dismissed their appeals on Aug. 7, 2025. The dismissal left the penalty and injunction in place, without an appellate ruling on Torres’ reasoning. The ruling also left open whether other secondary-market XRP sales are investment contract transactions.