The US Securities and Exchange Commission (SEC) has filed an appeal against Ripple Labs with the Second Circuit Appeals Court. The appeal aims to reverse a previous decision by Judge Analisa Torres, who determined that XRP transactions with individual investors did not constitute unregistered securities. Released in July 2023, this verdict marked a significant victory for Ripple in the SEC’s December 2020 action.
In its most recent filing, the SEC claims that the district court erred by distinguishing institutional and retail sales. The agency claims that retail investors, even without knowing the sellers’ identities, anticipated rewards as a result of Ripple’s advertising efforts. Citing the Howey test, the SEC claims that these transactions meet the criteria of investment contracts, which are subject to federal securities laws. Furthermore, the regulator maintains that the use of XRP as employee compensation and in corporate transactions warrants classification as securities.
Ripple has sharply condemned the appeal. Chief Legal Officer Stuart Alderoty criticized the SEC’s arguments as a repetition of previous claims and expressed confidence in the company’s position. Ripple CEO Brad Garlinghouse shared this sentiment, accusing the SEC of rehashing ineffective techniques.
Pro-crypto legal professionals have also spoken forward. Attorney Jeremy Hogan criticized the SEC’s brief, citing its unwillingness to present tangible evidence linking XRP purchases to Ripple’s claims. Hogan said that the appeal is unlikely to produce major outcomes. Furthermore, speculation has circulated that the SEC may abandon its appeal following the resignation of Chair Gary Gensler on January 20.
Ripple has cross-appealed parts of the case it lost, including the finding that resulted in a $125 million civil penalty for institutional XRP sales. We anticipate that both appeals will require several months and may ultimately reach the Supreme Court. Observers expect that the case will create a precedent for cryptocurrency regulation in the United States, particularly under an administration perceived to be more crypto-friendly.
Despite continuous legal fights, XRP has maintained its market position. Following the SEC filing, XRP rose by more than 10%, showing investor confidence in the case’s eventual settlement. The token’s price trajectory, however, remains related to developments in the appeals process, with market sentiment being driven by conjecture about the SEC’s future measures.
