The United States Securities and Exchange Commission (SEC) has decisively dismissed Ripple Labs' latest plea for a reduced penalty, arguing that the proposed amount falls short of what is necessary to address the violations. Ripple had recently sought a reduction in penalties by drawing comparisons to the SEC’s settlement with Terraform Labs.

On June 13, Ripple presented a proposal to New York District Court Judge Analisa Torres, requesting a civil penalty of “no more than $10 million.” This request starkly contrasts with the SEC's demand for an $876.3 million penalty. In their argument, Ripple cited the SEC’s $4.5 billion settlement with Terraform Labs, which included a $420 million civil penalty, as a reference point for a more lenient penalty.

However, the SEC swiftly rebutted this argument in a letter to Judge Torres dated June 14. The SEC pointed out significant differences between the cases. Their settlement with Terraform Labs was influenced by several mitigating factors: the company’s bankruptcy status, its agreement to return funds to investors, and the dismissal of key leaders who were in charge during the violations. The SEC underscored that Ripple has not agreed to any comparable remedial actions. "Ripple is agreeing to none of this relief — in fact, Ripple is agreeing to nothing," the SEC emphasized.

Ripple’s argument that Terraform’s $420 million civil penalty was around 1.27% of its “$33 billion gross sales” was dismissed by the SEC as an inaccurate comparison. The regulator clarified that it calculated Terraform’s penalty based on “the gross profit of the violative conduct,” which it estimated at over $3.5 billion, resulting in a penalty ratio of nearly 12%.

Applying this same ratio to Ripple’s gross profits, the SEC argued that Ripple’s civil penalty should be $102.6 million. However, the SEC maintained that such a low penalty “would not satisfy the purposes of the civil penalty statutes.” The SEC’s proposed penalties for Ripple are nearly $2 billion in total, which includes $198.2 million in prejudgment interest, $876.3 million in civil penalties, and an additional $876.3 million in disgorgement.

The protracted legal battle between the SEC and Ripple dates back to 2020, when the SEC accused Ripple of selling unregistered securities. Judge Torres concurred with the SEC’s assertion, but specifically in relation to sales made to institutional investors.

Furthermore, the SEC recently objected to Ripple’s attempt to seal portions of its financial records, contending that the firm should disclose the revenue generated from XRP sales that Judge Torres ruled as unregistered. This objection highlights the SEC's insistence on transparency and accountability from Ripple.

Industry observers have noted the broader implications of this case for the cryptocurrency sector. Ripple’s case has become a landmark legal battle that could set significant precedents for how digital assets are regulated in the future. The SEC’s stringent stance underscores its commitment to enforcing securities laws and ensuring that companies adhere to regulatory standards to maintain market integrity.

As the legal proceedings continue, the SEC’s firm rejection of Ripple’s plea for a reduced penalty highlights the ongoing tension between regulatory authorities and cryptocurrency firms. The outcome of this case is anticipated to have far-reaching consequences for the regulation of digital assets and the future operations of cryptocurrency companies in the United States.