SEC in hot water after Ripple ruling, former agency attorney says

Although other federal district judges are not obligated to follow Judge Torres’ ruling, the opinion should still hold weight, Christian Schultz said

article-image

CryptoFX/Shutterstock modified by Blockworks

share

According to Christian Schultz, a former assistant chief litigation counsel at the SEC’s enforcement division, the recent partial judgment in the SEC’s case against Ripple has the potential to disrupt the agency’s other ongoing legal proceedings, despite being a district court ruling.

Judge Analisa Torres passed down a partial summary judgment last week, siding in part with the SEC with regards to the institutional sale of XRP tokens and in part with Ripple regarding programmatic sales. The case will proceed to trial, Torres ruled, but industry experts are still largely looking at the decision as a major triumph for Ripple and other token issuers. 

“There’s no way to look at the Ripple decision as anything but a win for the crypto industry,” Schultz said. “XRP is not a security and the company’s and executives’ transactions in XRP on the secondary market do not violate the securities laws.”

Read more: Crypto industry is ‘afraid to celebrate’ Ripple’s ‘giant win’ over the SEC

Although other federal district judges are not obligated to follow Torres’ ruling, the opinion should still hold weight, said Schultz, who now serves as a partner at Washington, DC-based Arnold and Porter. 

“That being said, it is a thoughtful decision from a well-respected jurist that other judges will find persuasive,” Schultz said. “That could spell problems for the SEC in other pending litigation, particularly those that are focused primarily if not exclusively on secondary market activity.”

The summary judgment issued this month was a partial ruling and not a full judgment. There are a number of issues still left to be dealt with at trial, including what, if any, penalty Ripple must face for its initial institutional sales of XRP, which the court has deemed a security.

The final numbers will take awhile to determine, Schultz said, but, in theory, Ripple could be ordered to pay disgorgement from the institutional sales, meaning the company would have to hand over any profits made from the sales, plus prejudgment interest. Ripple may also have to pay civil penalties. 

The SEC could still appeal the partial judgment ruling, but Torres’ claim that programmatic sales are not securities complicates other charges in the case, Schultz said. In its initial complaint, the SEC charged Ripple’s founder and former CEO Christian Larsen and former chief operating officer and current CEO Brad Garlinghouse with aiding and abetting securities laws violations. Those allegations in part rest on the assumption that XRP is a security. 

“The SEC could take a cue from Judge Torres’ ruling denying summary judgment on the aiding and abetting claims against the executives, which demonstrates the evidentiary weakness in those claims and the reasons a jury could rule in the executives’ favor at trial, and choose not to pursue those claims any further so it can appeal the arguments that it otherwise lost against Ripple and the executives,” Schultz said.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Flashnote Template (41).png

Research

We believe that few tokens at the application layer are diverging more from fundamentals than ZORA. Its fully-diluted P/S sits at 90x, pricing significant growth despite a consistent decline in weekly revenues since late July. We foresee an 80% decrease in protocol net margins due to a recent update to the fee structure that reduces trading fees from 3% to 1%, while boosting creators’ portion of the fee split. ZORA’s supply overhang also represents a near-term headwind, with 45% of ZORA’s supply (4.5B tokens or $350M at current prices) earmarked for the team & investors beginning to unlock on October 23, 2025 (36-month linear vesting schedule).

article-image

Insiders have the best information — markets should be willing to pay for it

article-image

The CFTC-regulated exchange is opening doors to crypto builders and traders through grants, partnerships, and new deposit options

by Blockworks /
article-image

DFS tells banking organizations to integrate blockchain monitoring tools to curb money laundering and sanctions risks

by Blockworks /
article-image

New short and long-term priorities include L1 gas boosts, ZK-EVMs, privacy reads, and a lean, quantum-resistant Ethereum

by Blockworks /
article-image

The new stBTC token redistributes Bitcoin gas fees to users, creating liquid yield without inflation or lockups

by Blockworks /
article-image

The reserve will collect protocol revenues to back W token, alongside new yield and unlock schedule

by Blockworks /