- Ripple and its executives opposed the SEC’s motion to file an appeal in the lawsuit.
- Ripple argues that there is no legal rule to back the SEC’s contention that the court reached the wrong result in applying the Howey Test to XRP.
- SEC vs. Ripple lawsuit cannot be terminated by appeal as payment giant says that ruling on XRP’s institutional sales still pending.
In its filing, Ripple, the payment giant explains that there is no legal rule backing the SEC’s request to file an appeal. Throughout the long drawn-out legal proceedings, the SEC insisted on the application of the Howey Test to determine whether XRP is a security or investment contract. With Judge Torres’ application, the ruling impacts the regulator’s other lawsuits, and this has motivated the SEC to file an appeal.
According to XRPL Layer 2 project builder and former lawyer Scott Chamberlain, the SEC “won on the law front and lost on the case facts.” Ripple and its executives argue that this does not justify an appeal ahead of a final verdict in the SEC vs Ripple lawsuit.
Ripple opposes SEC motion to appeal XRP ruling
Ripple, a cross-border payment remittance firm, filed a motion to oppose the financial regulator’s application to appeal the XRP ruling. Since the beginning of the SEC’s lawsuit against Ripple, the regulator insisted that the court apply the Howey Test to facts and determine whether XRP is an investment contract.
Upon successful application of the Howey Test, Judge Analisa Torres determined that XRP in itself is not a security. The ruling handed Ripple a partial win against the SEC, and this outcome has influenced the regulator’s lawsuits against Coinbase and other cryptocurrency firms and projects. The SEC has applied to file an interlocutory appeal, asking the court to revisit the ruling and application of the Howey Test.
In short, the SEC won on the law and lost on the facts. They shouldn’t be allowed to appeal the law they won on so it can be adjusted to the facts they lost on. That will just raise new legal issues, lead to further appeal points, and complicate everything. They should wait until… https://t.co/BMM0psLs9d
— Scott Chamberlain | ??? (@scotty2ten) August 16, 2023
In its filing, Ripple states that there is no legal rule backing the SEC’s request to file an interlocutory appeal. Further, the final verdict in the SEC vs. Ripple lawsuit could influence the outcome of the appeal.
At the time of writing, XRP price is $0.5892 on Binance, recovering from the weekly low of $0.5717.
SEC vs Ripple lawsuit FAQs
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
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