The U.S. Securities and Exchange Commission (SEC) is seeking to challenge Judge Analisa Torres’ ruling in July that stated Ripple’s programmatic sale of XRP cryptocurrency did not qualify as sales of financial securities. The SEC believes that the ruling could have gone the other way, as there are differing opinions on its legal basis.
In a court filing on Wednesday, the SEC requested that Judge Torres allow the federal appeals court to review her decision. The SEC argued that there are “controlling questions of law on which there is substantial ground for differences of opinion, as reflected by an intra-district split that has already developed.” This move comes after Ripple achieved a partial victory in its lawsuit with the SEC. The SEC initially accused Ripple of offering XRP as an unregistered security in December 2020. However, Judge Torres ruled in July that while Ripple’s XRP sales to institutional investors violated securities laws, sales on public exchanges to retail investors did not.
The SEC justified its appeal by referring to another ongoing lawsuit between itself and Terraform Labs. In this case, the SEC accused the blockchain developer of alleged crypto securities fraud. Ruling Judge Jed Rakoff rejected Terraform’s motion to dismiss the case and expressed disagreement with Judge Torres’ decision on the Ripple ruling.
The lawsuit between the SEC and Ripple is still ongoing, with a jury trial scheduled for the second quarter of 2024. As the SEC does not have the immediate right to appeal, it is requesting permission to file an “interlocutory” appeal. Ripple Labs Chief Legal Officer Stuart Alderoty clarified this in a tweet, stating that Ripple will file its response with the court next week.
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Interlocutory appeals are appeals that take place before all claims are resolved for all parties involved, and they are only allowed under specific circumstances. The SEC argues that a timely review of the court decision in the Ripple case is necessary due to the potential impact on other pending actions.
Apart from Ripple, the SEC has also sued various other cryptocurrency exchanges, including Binance and Coinbase, for alleged securities violations. In a separate development, U.S.-based crypto exchange Bittrex, which was sued by the SEC in April for allegedly operating as an unregistered securities exchange, has agreed to settle the charges by paying a fine of $24 million.
The SEC’s actions reflect its ongoing efforts to establish clarity and regulate the cryptocurrency market. The agency has been cracking down on crypto-related companies and exchanges, aiming to protect investors and ensure compliance with securities laws. However, the legal status of cryptocurrencies remains a contentious issue, with different courts and regulators interpreting the law differently.
The outcome of the SEC’s appeal in the Ripple case could have far-reaching implications for the crypto industry. It will provide a precedent for how other cryptocurrencies are treated under securities laws, potentially influencing the regulatory environment for years to come. As the case progresses, market participants and industry observers will closely watch for updates and developments.
