SEC Files Appeal in Ripple Case; Execs Slam Agency’s Move

Highlights:

• The SEC has submitted a notice of appeal in its case against Ripple Labs.
• This appeal follows Judge Analisa Torres’ ruling that Ripple’s institutional sales violated securities laws, but retail sales did not.
• The SEC’s appeal has halted the progress of the Bitwise spot XRP ETF.

On October 2, the U.S. Securities and Exchange Commission (SEC) officially filed a Notice of Appeal to contest some aspects of Judge Analisa Torres’ July 13, 2023, in its prolonged legal battle against Ripple Labs and XRP. This action effectively halts the progress of Bitwise’s recently proposed XRP ETF, raising uncertainty about its future.

#XRPCommunity #SECGov v. #Ripple #XRP BREAKING: The @SECGov has filed a Notice of Appeal of Judge Torres’s Ruling. pic.twitter.com/j8bLIZQ5LT

— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) October 2, 2024

SEC Appeal Resurrects Ripple Case After Partial Legal Victory

The SEC sued Ripple in December 2020, alleging the company conducted a $1.3 billion unregistered securities offering through XRP sales. Nearly three years later, in July 2023, Judge Analisa Torres ruled that XRP is not a security when sold on public exchanges, giving Ripple a partial win.

The judge also determined that Ripple’s direct XRP sales to institutional investors, totaling $728 million, were unregistered securities sales, leading to a $125 million penalty for the company. The SEC initially aimed for a much larger $2 billion fine, but the reduced penalty was considered a win for Ripple. However, the unresolved case has resurfaced with the SEC’s appeal.

The SEC has appealed to the Second Circuit Court of Appeals, signaling its intention to challenge the ruling on multiple grounds. A key aspect of the SEC’s appeal is its belief that the district court’s decision conflicts with long-standing Supreme Court precedents and established securities laws.

The SEC contends that XRP should be classified as a security for all sales, whether institutional or retail. It argues that XRP’s classification should remain consistent regardless of the transaction type. The SEC’s appeal may prolong Ripple’s legal battle into 2025, creating ongoing regulatory uncertainty for XRP and related financial products.

Ripple Execs Slam SEC Decision

Ripple’s chief legal officer Stuart Alderoty stated on X that the SEC’s appeal was “disappointing, but not surprising.”

He said:

“This just prolongs what’s already a complete embarrassment for the agency. The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course, there were no victims or losses.”

Garlinghouse mentioned that the company is ready to defend its stance in court for however long it takes. It was highlighted that XRP’s current status as a non-security remains unchanged despite the ongoing appeal, which was described as both frustrating and misguided.

If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC.

Somehow, they still haven't gotten the message: they lost on everything that… https://t.co/1hW7xVSL9b

— Brad Garlinghouse (@bgarlinghouse) October 2, 2024

He spoke about the lawsuit last month at KBW2024 in Seoul, South Korea. He expressed uncertainty regarding whether the SEC would appeal. However, he emphasized that the regulator had no realistic path to overturn the core ruling that “XRP is not, in and of itself, a security.”

XRP ETF Approval Likely to Face Delay Due to SEC Appeal

Crypto2Community reported that Bitwise recently applied for the first-ever spot XRP ETF. The appeal process is expected to delay any potential listing or trading of XRP-related financial assets, including the Bitwise ETF.

In a recent X post, Alex Thorn, Head of Research at Galaxy Digital, mentioned that an SEC appeal would greatly reduce the chances of an XRP ETF, placing the likelihood at “near zero.”

SEC has until next week (Oct. 7) to appeal Judge Torres’ July 2023 ruling (which held that secondary sales of XRP through exchanges were not securities)

likelihood of this ETF filing succeeding drops to near zero if they do appeal (i’ll be very surprised if they don’t appeal) https://t.co/FBGVZPNvwV

— Alex Thorn (@intangiblecoins) October 1, 2024