In an ongoing legal dispute with the U.S. Securities and Exchange Commission (SEC), Ripple Labs, the company behind the XRP token, has presented a new argument for reducing its proposed penalty. Ripple contends that the recent $4.5 billion settlement involving Terraform Labs should serve as a benchmark for lowering its own penalty to $10 million.

Earlier this year, the SEC suggested that Ripple pay a hefty civil penalty totaling $2 billion. This amount comprises $876 million in disgorgement, $198 million in prejudgment interest, and an additional $876 million as a civil penalty. Ripple, however, believes there is now substantial evidence to argue for a lesser penalty.

In the case of Terraform Labs, the SEC settled for a total of just over $4 billion, which included $3.6 billion in disgorgement and $420 million in civil penalties. This settlement followed allegations of a $40 billion investor loss. Ripple’s legal team pointed out that this civil penalty amounted to approximately 1.27% of Terraform Labs' gross sales of $33 billion. They highlighted that in various other cases, the SEC has agreed to civil penalties ranging from 0.6% to 1.8% of the defendant's gross revenues.

Ripple argued that the SEC's proposed penalty in their case significantly exceeds these percentages, despite the absence of fraud allegations and the fact that institutional buyers did not incur substantial losses. The company’s lawyers emphasized these points in their letter to the court, aiming to illustrate the disparity and argue for a more proportionate penalty.

When the Terraform Labs settlement was announced, Ripple's chief legal officer remarked that the SEC appeared more focused on gaining media attention for its actions rather than ensuring fair penalties. This statement underscores Ripple’s stance that the SEC’s proposed penalties in their case are disproportionately high compared to the Terraform Labs settlement.

In summary, Ripple Labs is leveraging the recent Terraform Labs settlement as a key argument in their SEC court battle, advocating for a significant reduction in their proposed penalty. By drawing comparisons between the two cases, Ripple aims to demonstrate that the SEC's penalty suggestions in their case are excessively severe.