Meta-Gaming Regulatory Enforcement as Litigation Technique | Insights

Holland & Knight continues its SECond Opinions Blog Summer Series that includes posts written and researched by the associates from our Securities Enforcement Defense Team. This weblog comes from Miami Associate Andrew W. Balthazor, co-chair of the agency’s Crypto Asset Dispute Team, who focuses his observe on fixing issues born of digital-era improvements akin to distributed ledger applied sciences and cryptocurrencies and different high-stakes advanced business litigation.

The regulatory panorama is rarely static. The arrival of a brand new presidential administration usually brings a shift in enforcement priorities, and President Donald Trump’s administration has delivered that in spades with regard to the monetary and crypto sectors.

For these dealing with enforcement actions, the temptation to “wait out” what they could view as an unfavorable surroundings or search reduction primarily based on new management’s coverage adjustments is actual. Now, with the SEC’s Aug. 21, 2025, appointment of Judge Margaret Ryan as its new director of the Division of Enforcement, many within the securities trade – and definitely these within the crosshairs of ongoing investigation – are curious to see what develops when it comes to any new insurance policies or priorities

But latest occasions in three instances – SEC v. Ripple, CFTC v. Gemini Trust and CFPB v. Townstone Financial – exhibit each the potential and limits of counting on such shifts as a litigation technique.

Ripple: Settlement Blocked, Appeals Dismissed and the Limits of Executive Discretion

Ripple Labs’ long-running battle with the SEC over XRP gross sales reached a essential juncture this summer season. After Judge Analisa Torres discovered that Ripple’s institutional gross sales of XRP violated the Securities Act of 1933, she imposed a $125 million penalty and a everlasting injunction. Both events appealed, however because the SEC’s enforcement posture softened underneath the brand new administration, the events agreed to settle: Ripple would pay a diminished $50 million penalty and have the injunction lifted, contingent on the district court docket’s approval.

The court docket didn’t approve, emphasizing that her judgment was primarily based on the information and regulation as decided at trial, not on shifting company priorities. Her order prioritizes the general public curiosity in finality and deterrence however the events’ non-public settlement, particularly the place earlier proceedings resulted to find the underlying conduct egregious and more likely to recur. The court docket indicated that it might not vacate the injunction or scale back the penalty, noting that neither the information nor the regulation had modified – solely the SEC’s urge for food for enforcement had.¹

Of notice, Ripple agreed to dismiss its enchantment although it may have invested in appellate litigation for an opportunity to keep away from a $125 million penalty – a doubtlessly glorious return. The danger of making opposed U.S. Court of Appeals for the Second Circuit precedent on institutional gross sales usually and with respect to Ripple’s future fundraising actions could have weighed closely towards Ripple prosecuting its enchantment. Ultimately, each events dismissed their appeals in early August 2025, leaving Judge Torres’ rulings intact and unreviewed. The retail/secondary market gross sales win for Ripple stands, however the institutional gross sales discovering stays. And Ripple’s penalty and obey-the-law injunction stay in place.

Key Takeaway: Even when company priorities shift, courts are reluctant to revisit closing judgments absent extraordinary circumstances. The judiciary’s dedication to finality and the general public curiosity can override the events’ need to decide on new phrases, particularly the place the information and regulation stay unchanged.

Gemini: Settlors’ Remorse and Efforts to Undo a Prior Settlement

Gemini Trust’s expertise with the Commodity Futures Trading Commission (CFTC) provides a cautionary story concerning the dangers of settling too quickly. After years-long investigation and litigation, Gemini settled a false statements case in early 2025 and agreed to pay a considerable penalty. But as the brand new administration started dropping different crypto enforcement actions, Gemini apparently discovered itself wishing it had waited. In an in depth criticism to the CFTC Inspector General, Gemini argued that it was compelled to settle underneath duress, the Division of Enforcement acted improperly and the underlying proof was flawed. The letter reads as each a autopsy and a plea for reduction, highlighting alleged abuses and double requirements within the company’s conduct.²

Gemini’s effort to unwind its settlement faces steep odds. Courts and companies are usually unwilling to revisit voluntary settlements, particularly the place the one change is a brand new enforcement philosophy. The sensible lesson: Timing issues. Had Gemini delayed, it might need benefited from the administration’s modified priorities, although Gemini little doubt made what it thought-about the perfect resolution on the time, underneath completely different circumstances. Now, the settlement could properly stand, and Gemini’s recourse is restricted.

Key Takeaway: Settling within the face of aggressive enforcement could foreclose later alternatives to profit from a extra favorable regulatory local weather. Once a settlement is reached, courts and companies are loath to reopen the case just because the winds have shifted.

Townstone Financial: Finality Trumps Policy Reversal

In CFPB v. Townstone Financial, the events collectively moved underneath Federal Rule of Civil Procedure 60(b)(6) to vacate a stipulated judgment and consent decree after the CFPB’s new management, appearing underneath a presidential government order, concluded that the case had been improperly filed. For its half, the company argued that its prior enforcement motion lacked a factual foundation and focused constitutionally protected speech. But the district court docket denied the movement, emphasizing the significance of finality and the general public curiosity in upholding judgments, particularly these affecting the general public relatively than simply non-public events.³

The court docket was clear in its reasoning: Rule 60(b)(6) reduction is reserved for extraordinary circumstances, and a change in company management or enforcement philosophy doesn’t suffice. The voluntary nature of the settlement, absence of recent information or regulation, and public impression of the alleged wrongdoing all weighed towards vacatur. The court docket refused to open what it noticed as a “Pandora’s box” of permitting new administrations to routinely revisit and unwind accomplished litigation.⁴

Key Takeaway: Courts are extremely proof against vacating judgments or consent decrees primarily based solely on a change in company management or enforcement priorities. The want for finality and public curiosity in steady enforcement outcomes are paramount.

Strategic Implications: Timing, Context and the Limits of “Meta-Gaming” Enforcement

These instances collectively illustrate that although a brand new administration’s enforcement priorities can have an effect on the probability of future actions, they not often present a dependable foundation for undoing previous judgments or settlements. Timing and context are essential: Those who delay litigation or settlement could profit from a extra favorable regulatory local weather, however as soon as a judgment is entered or a settlement is reached, the trail to vary prior outcomes and procure completely different reduction is slender and steep.

For enforcement targets, the lesson is evident. The prospect of a future coverage shift could at occasions justify a willingness to pursue or proceed litigation in gentle of the issue in later unwinding resolved disputes. Courts stay steadfast of their dedication to finality, public curiosity and the integrity of the judicial course of and, thus, resist efforts to un-ring the bell of an earlier decision.

Bottom Line: Meta-gaming regulatory enforcement by betting on future coverage adjustments generally is a high-risk technique. Though it could repay for individuals who wait, those that settle or obtain judgment underneath a previous administration are unlikely to seek out reduction just because the federal government’s priorities have modified.

For extra on the evolving intersection of regulatory enforcement and government department priorities, keep tuned to SECond Opinions.

Notes:

¹ See Order Denying Motion for Indicative Ruling, SEC v. Ripple Labs, Inc., No. 20-cv-10832, at *4–5 (S.D.N.Y. June 26, 2025).

² See June 13, 2025, letter from Gemini Trust Co. LLC to CFTC Inspector General Christopher Skinner.

³ See Order Denying Rule 60(b)(6) Motion, CFPB v. Townstone Fin., No. 20-cv-04176, (N.D. Ill. June 16, 2025).

⁴ Id. at *14.