A recent development in the ongoing legal conflict between Ripple and the U.S. Securities and Exchange Commission (SEC) involves the SEC proposing a substantial financial penalty against Ripple. This move underscores the severity of the disagreement regarding the classification of Ripple's XRP Coin as a security. While the SEC has faced challenges in similar cases before, this action signifies a more aggressive approach towards Ripple.

Ripple and the SEC have been engaged in a legal battle since late 2020, with key legal arguments such as the Hinman documents and the Howey test playing significant roles. Despite some partial judgments, the primary issue remains unresolved, leading the SEC to seek significant fines as a deterrent against Ripple's non-compliance with securities laws.

The SEC has requested court approval for penalties amounting to $1.95 billion, including disgorgement, prejudgment interest, and civil penalties. These fines aim to reflect the scale of unregistered XRP sales conducted by Ripple over the years.

Critics, such as Jeremy Hogan, have expressed concerns about the potential impact on individual investors if Ripple is forced to sell a substantial amount of XRP to cover the penalty, potentially causing a decline in the coin's market value. Despite the SEC's argument that the fines are justified due to Ripple's ongoing XRP sales in violation of prior warnings, Ripple's Chief Legal Officer, Stuart Alderoty, has accused the SEC of trying to punish and intimidate the company. Ripple plans to formally respond to the proposed penalties in April as the legal battle with the SEC unfolds.