The U.S. Securities and Exchange Commission’s 2020 lawsuit against Ripple Labs is officially over, after the two parties informed the Second Circuit Court of Appeals that they were voluntarily dismissing their respective appeals of a 2023 ruling in the case.

The SEC and Ripple will each bear their own costs, the filing said on Thursday. The joint stipulation ends the legal battle between the SEC and Ripple which began in 2020 after the SEC sued Ripple in 2020 under former Chair Jay Clayton (who now runs the U.S. Attorney’s Office for the Southern District of New York) alleging it violated securities laws through the sale of XRP, the token closely associated with the company.

XRP jumped 5% after Thursday’s filing, trading around $3.27 as of press time.

The SEC filed an appeal in 2024 after a district judge’s ruling in 2023 said that Ripple making XRP available to retail traders through exchanges, while Ripple cross-appealed to maintain its arguments in the case.

The parties agreed to drop their respective appeals in June, Ripple CEO Brad Garlinghouse said at the time, leaving District Judge Analisa Torres’ penalties in place. These penalties were tied to her finding that Ripple had violated securities laws in selling XRP to institutional traders, and included $125 million in fines and a permanent injunction against further violations of the law.

Ripple and the SEC paused their appeals earlier this year after Donald Trump retook office as U.S. president and installed new leadership at the agency. The SEC has dropped over a dozen cases and investigations into crypto companies in the last few months.

The parties attempted to negotiate these penalties down, but multiple attempts were rejected by Judge Torres over procedural and other concerns.

The U.S. Securities and Exchange Commission has been busy over the past few weeks, hinting at a brighter future for crypto companies.

PS: I’ll be in San Francisco next week for the American Banker Payment Forum. Say hello.

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The narrative

The crypto industry racked up a number of early wins in the first month (and week) of Donald Trump’s second term as U.S. president. The U.S. Securities and Exchange Commission announced it would drop or close half a dozen open investigations and ongoing cases, and asked courts to pause two more.

Why it matters

The crypto industry clearly won big during the 2024 election, and it’s only just beginning to see what that means. Questions of how it actually should or shouldn’t be regulated are now up in the air.

Breaking it down

Over the last week and change, the SEC filed to withdraw its case against crypto exchange Coinbase, pause its cases against Binance and Tron and informed ConsenSys, OpenSea, Robinhood, Uniswap and Gemini it would close its cases or investigations into those platforms.

These announcements come on the heels of SEC Commissioner Hester Peirce announcing she would head up a new crypto task force at the regulatory agency and publishing a number of open questions to the general public about how securities law might apply to different types of cryptocurrencies and defining how the SEC would oversee this industry. The SEC also withdrew staff accounting bulletin 121, an accounting standard much of the industry hated.

While there are a number of investigations or cases still outstanding, it’s clear the SEC has taken a sharply diverging tack under Acting Chair Mark Uyeda from when former Chair Gary Gensler helmed the agency.

Commissioner Hester Peirce said the SEC was now working to develop more policy that would guide the Division of Enforcement’s future actions, rather than have these enforcement actions “write regulatory policy.”

“We’re really trying to get back to using our enforcement division for its intended purpose, and letting the regulatory divisions do the hard work of figuring out how to craft rules, guidance [and] interpretations,” she told CoinDesk in an interview. “And then enforcement has a role after that, of course, to enforce the rules that are on the books. But this has just been an area where we’ve kind of gone about it backwards, and we’re trying to right the ship here.”

The industry has been taking a victory lap with the withdrawals and dropped cases (and to be clear, it’s not just the SEC withdrawing enforcement actions and investigations).

Amanda Tuminelli, the chief legal officer at DeFi Education Fund, a decentralized finance-focused lobbying group, said any groups in the crypto sector should be more confident they would not be sued “for a mere registration violation.”

“I don’t think that we’ve won. I won’t think that we have won until there are clear final rules on the books that make it clear, that are durable wins that make it clear that the industry is going to be able to innovate and exist for years in the future,” she said in an interview.

On the other side of this argument, the SEC — and Congress — are “actively welcoming” chaos from the crypto sector to the broader financial system, said Corey Frayer, the director of Investor Protection for the Consumer Federation of America and a former SEC senior adviser to Gensler.

“The SEC is not just abandoning enforcement actions, it’s actively building an unregulated market for crypto assets,” he said in an interview.

This could create risk for contagion, he said, referencing FTX and Silicon Valley Bank’s collapses. FTX had an issue with leverage (and the various FTX-affiliated tokens, which were used as collateral but lost their value following the exchange’s collapse).

“As we’ve learned from prior financial crises, ramping up leverage risks that any single bad bet or any significant move in the value of one asset or intermediary will crash the entire crypto sector,” Frayer said.

Congress’s efforts may take some time. Earlier this week, lawmakers with the Senate Banking Committee’s new digital assets subcommittee convened its first hearing focused on future legislation.

Lewis Cohen, an attorney who’s long been active in the crypto sector and a witness at the hearing, said developers had “raced ahead of the legal and policy frameworks designed decades ago.”

“Perhaps most critically, this uncertain regulatory environment has left consumers and users of digital assets at risk,” he said. “A clear, practical and flexible federal statutory regime is urgently needed to address activity involving digital assets in both the primary and the secondary markets.”

Former Commodity Futures Trading Commission Chair Timothy Massad suggested Congress should focus on stablecoins and hold off on any kind of market structure legislation, at least until his former agency and the SEC have had a chance to work on rulemakings and guidance first.

Tuminelli said she was worried that some builders might take these recent signs to mean “it’s just open season,” even though she expects law enforcement agencies to continue cracking down on outright criminal activity. Other recent incidents, like Bybit’s $1.5 billion hack, are also poor signs for the industry.

“We have things like Bybit to worry about, and we do have to worry about national security concerns and things like that,” she said. “So there are still going to be compliance issues that people need to pay attention to, even as there is a much greater runway in front of us.”

• Bybit Sees Over $4 Billion ‘Bank Run’ After Crypto’s Biggest Hack: Bybit lost $1.5 billion to a hack — more on this below — and then another $4 billion to customer withdrawals.
• Bybit Closes ‘ETH Gap’ as Exchange Replenishes $1.4B Hole After Hack: Bybit claims it was able to fill its $1.5 billion hole through loans and purchases of ether (ETH).
• North Korean Hackers Were Behind Crypto’s Largest ‘Theft of All Time’: The infamous Lazarus Group, the North Korean hacking entity, was behind the Bybit hack, Arkham Intelligence and crypto sleuth ZachXBT said. The FBI also alleged Lazarus was behind the hack.
• Bybit Declares ‘War on Lazarus’ as It Crowdsources Effort to Freeze Stolen Funds: ByBit is offering a 5% bounty to anyone who can help it freeze or recover its stolen funds.
• Payments Card Issuer Infini Offers Reward for Return of Funds After $49 Million Exploit: While Bybit’s hack took up a lot of the attention on hacks this week, stablecoin newbank Infini also lost nearly $50 million to a hack. The company is offering to let the hacker keep 20% of the stolen funds if it returns the rest.
• Germany’s Centre Right Alliance Secures Most Seats in EU Nation’s Election: Germany’s Centre Right Alliance won the most seats in the country’s parliamentary elections last weekend, with the far-right Alternative for Germany (AfD) came in second.
• U.S. Appeals Court (Mostly) Affirms 2023 Ruling Tossing Out Uniswap Class Action Suit: The Second Circuit Court of Appeals largely affirmed a 2023 decision from District Court Judge Katherine Polk Failla about a decentralized exchange’s liability for third-party tokens.
• OKX Settles U.S. DOJ Charges, Pays Over $500M Penalty and Forfeiture: OKX settled charges with the U.S. Department of Justice, agreeing to pay over $500 million in penalties and forfeited fees to resolve allegations it operated without a money transmitter license. An acting U.S. attorney said the exchange facilitated over $5 billion in suspicious transactions.
• How to Prepare for a Major Compliance Failure Settlement: The OKX Approach: CoinDesk’s Ian Allison reports on how OKX prepared to announce compliance failure settlements through a meticulously-prepared crisis management document.
• UK Introduces Crime Bill That Extends Powers for Courts When Retrieving Crypto: A new bill in the U.K. details new authorities for local law enforcement agencies to seize crypto in suspected crimes.
• One of 2 Remaining Democrats at U.S. CFTC Will Exit When New Chair Arrives: CFTC Commissioner Christy Goldsmith Romero — whose term has expired — will leave the agency after former commissioner and nominee for chair Brian Quintenz is confirmed by the Senate.
• Crypto-Friendly Former Congressman Patrick McHenry Joins A16z as a Senior Advisor: Former House Speaker Pro Tempore and Financial Services Committee Chair Patrick McHenry is joining venture capital firm Andresseen Horowitz as a senior advisor.
• Hackers Are Using Fake GitHub Code to Steal Your Bitcoin: Kaspersky: Some seemingly legitimate GitHub projects come with Trojan Horse files which execute malicious code which can be used to steal your crypto, Kaspersky warned.
• Michael Novogratz’s Galaxy Hires Zac Prince, Former CEO and Co-Founder of BlockFi: Former BlockFi CEO Zac Prince is joining Galaxy Digital as a managing director.
• Crypto Asset Manager Bitwise Bolsters Balance Sheet With $70M Equity Raise: Crypto asset manager Bitwise, which launched some of the first crypto exchange-traded products, raised $70 million in an equity deal.
• U.S. Law Enforcement Seizes $31M in Crypto Tied to Uranium Finance Hack: Hackers stole $50 million from automated market maker Uranium Finance in 2021. U.S. authorities recovered $31 million in crypto tied to that hack, they announced last week.
• U.S. Appeals Court (Mostly) Affirms 2023 Ruling Tossing Out Uniswap Class Action Suit: The Second Circuit Court of Appeals largely affirmed District Judge Katherine Polk Failla’s dismissal of a class action lawsuit against Uniswap, which alleged that Uniswap Labs was responsible for third parties listing scam tokens on the decentralized exchange.
• Crypto Trading Platform BitMEX Is Looking for a Buyer: Sources: The headline is pretty self-explanatory.
• Utah One Vote Away, But Some States Fail to Break Through on Crypto Stakes: Jesse Hamilton took a look at efforts to launch state crypto reserves — some have faltered somewhat.
• U.S. Treasury’s New Crypto Point Person Says Stablecoin Law a Good First Goal: Jesse also spoke to Tyler Williams, the former Galaxy Digital attorney now advising the U.S. Treasury Department on digital assets.
• FTT Briefly Spikes After Sam Bankman-Fried Tweets for First Time in 2 Years: Sam Bankman-Fried’s X (formerly Twitter) account shared posts for the first time in two years about checking email and laying people off, a seeming reference to Elon Musk and the Department of Government Efficiency (the renamed U.S. Digital Service). It’s unclear who is actually tweeting from the account — Bankman-Fried is still detained in the Metropolitan Detention Center and can only communicate online through the jail’s Corrlinks tooling. I’m told it’s unlikely his account is compromised though.

Outside of enforcement actions, the crypto industry is looking to the SEC for another purpose: Approving a broad swath of new exchange-traded products backed by, or tracking the prices of digital assets that weren’t under significant discussion a year ago.

In recent weeks, companies like Canary, Grayscale and WisdomTree have filed the initial paperwork for ETPs tracking the prices of cardano (ADA), solana (SOL), XRP (XRP), litecoin (LTC), hedera (HBAR) and polkadot (DOT).

Unlike in previous years, where there was uncertainty about how far an application might go (during the race to launch a spot bitcoin (BTC) and later ether (ETH) ETF), the expectation now seems to be that retail and institutional traders will soon be able to gain exposure to these digital assets through this type of regulated investment product.

Wednesday

• 15:00 UTC (10:00 a.m. ET) The House Ways and Means Committee, the panel overseeing tax issues, advanced a Congressional Review Act effort to undo an Internal Revenue Service rule to impose a tax reporting regime on DeFi entities. The resolution now goes to the full House of Representatives.
• 19:30 UTC (2:30 p.m. ET) The Senate Banking Committee’s digital assets subcommittee met to discuss stablecoin and market structure legislation.

• (The Wall Street Journal) A lawyer with X (formerly Twitter) told a lawyer at an advertising conglomerate to have that conglomerate’s clients spend advertising dollars on the social media platform “or else,” the Journal reported.
• (The Ringer) The Ringer is out with an extensive report on NBA Top Shots.
• (The New York Times) The Times, for its part, has an extensive report on Elon Musk’s journey into his current White House role.
• (The Washington Post) Speaking of Musk, the Post detailed the government loans that supported his various companies over the years.
• (NPR) The Social Security Administration plans to reduce its headcount by 7,000.
• (Science) Universities are canceling plans to host students due to National Science Foundation cuts.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Bluesky @nikhileshde.bsky.social.

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See ya’ll next week!