It is official — the SEC has reversed course on its approach to crypto enforcement. After five years of litigation against Ripple Labs for allegedly selling an unregistered security, the XRP token, the SEC, on March 19, 2025, announced that it intends to drop its appeal. This decision is the latest in a series of actions taken by the SEC marking a radical shift in regulating digital assets.
The SEC's decision to drop its appeal comes amid sweeping changes in the SEC's approach to crypto. This includes the launch of a Crypto Task Force, led by Commissioner Hester M. Peirce, aimed at establishing clear regulatory boundaries. Commissioner Peirce has also signaled a new direction for crypto oversight, emphasizing a more structured, transparent and navigable framework. Additionally, the SEC has issued fresh guidance that "meme coins" are not securities, further reflecting its evolving stance on digital assets.1
Prior SEC Litigation
The SEC sued Ripple in December 2020, alleging that its XRP token was sold as an unregistered security. In July 2023, Judge Analisa Torres ruled that XRP was a security when sold to institutional investors but not when sold on public exchanges. In August 2024, Ripple was ordered to pay $125 million in penalties, with the court reaffirming that secondary sales were not securities transactions. Both Ripple and the SEC appealed different parts of the ruling, but before briefing began, Ripple announced the SEC's intent to drop its appeal. Now "in the driver's seat,"2 Ripple is weighing how best to pursue its cross appeal, which could further clarify legal boundaries for crypto asset sales.
Notably, the SEC's decision to drop the Ripple appeal follows its recent win in the Terraform Labs case, heard in the same district as Ripple. Unlike in Ripple, Judge Jed Rakoff ruled that secondary-market buyers had a reasonable expectation that Terraform would use their investments to generate profits — aligning with the Howey test and supporting the SEC's argument that the tokens should be considered securities. This ruling was seen as a major victory for the SEC's position at that time and a direct rebuttal of the approach taken in Ripple. The SEC's move marks a significant moment in its evolving approach to crypto regulation — one that appears to prioritize strategic withdrawals over sweeping enforcement battles.
Takeaway
It is clear the SEC has recalibrated its approach on crypto. Other regulators, both in the US and globally, may follow suit — some adopting a similarly lighter touch, while others move to tighten oversight to address gaps and exert greater control. Meanwhile, Congress' role in shaping new crypto regulations remains uncertain, with legislative efforts still in flux. Given this evolving landscape, firms must stay vigilant and continue to closely monitor new developments.
Footnotes
1 See SEC Division of Corporation Finance, "Staff Statement on Meme Coins" (Feb. 27, 2025), available at https://www.sec.gov/newsroom/speeches-statements/staff-statement-meme-coins?utm_medium=email&utm_source=govdelivery. For more guidance on the SEC's meme coin guidance see Schulte Roth & Zabel, "SEC's Division of Corporation Finance Says Meme Coins Are Not Securities", (March 3, 2025), available at https://www.srz.com/en/news_and_insights/alerts/secs-division-of-corporation-finance-says-meme-coins-are-not-securities.
2 @s_alderoty, X, (March 19, 2025, 9:16 AM), available at https://x.com/s_alderoty/status/1902348432913641550
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