The U.S. Securities and Exchange Commission (SEC) has shown intention to appeal the recent rulings in the Ripple lawsuit.
In the ongoing legal battle against Terraform Labs and its CEO Do Kwon, the SEC filed new documents last Friday, claiming that the judge’s rulings in the Ripple case were “wrongly decided” and may be subject to appeal.
“Contrary to Ripple’s assertions, much of the ruling supports the SEC’s claims in this case,” the documents said. “Those portions of Ripple were wrongly decided, and this court should not follow them.”
The federal judge ruled in favor of Ripple, saying the company did not violate any securities laws when offering its native token XRP to retail investors. However, it breached the law concerning institutional investors.
The controversy lies in the application of the Howey test, a legal assessment used to determine if a financial instrument qualifies as an investment contract under SEC regulations.
Terraform’s lawyers cited the Ripple ruling as their defense and requested the dismissal of the lawsuit against them. The SEC argues that the judge should dismiss the Ripple case’s recent rulings on XRP’s retail sales. The ruling is said to create an artificial distinction between the expectations of retail and institutional investors.
“The court must draw reasonable inferences in the SEC’s favor, including that the institutional buyers in this case — such as trading firms that purchased [Ripple’s] crypto assets with no restrictions on resale—purchased because they viewed the assets as an investment opportunity into Terraform’s efforts,” said the SEC.
CryptoLaw founder John Deaton dismisses the notion that the SEC’s potential appeal would be a significant setback for Ripple.
“An appeal is not even close to a setback,” the crypto lawyer said via Twitter. “Don’t let anyone underestimate how significant this win is.”
Deaton said an appeal would take considerable time, suggesting it would be at least two years before the Second Circuit’s decision. Until then, the recent ruling in favor of Ripple remains the law.
SEC Chair Gary Gensler has said he is “disappointed” with some aspects of the decision, which could have far-reaching implications for other tokens facing regulatory heat.
In the Ripple case, Judge Analisa Torres ruled that XRP is not necessarily a security except when sold to institutions to raise funds. The judge determined that public buyers of XRP did not have a reasonable expectation of profits derived from Ripple’s efforts, a critical factor in the Howey test’s application.
Deaton further explained that even if the SEC successfully challenged Torres’ application of the Howey test on one front, she could still rule similarly when considering other aspects of the test, such as a “common enterprise” and the “investment of money.” It presents a significant challenge for the SEC, as proving a common enterprise is far more difficult than demonstrating an expectation of profit derived from others’ efforts.
Ripple CEO Brad Garlinghouse described the ruling as an “unequivocal win for Ripple and for crypto in the U.S.” He highlighted the need for clear legislation rather than regulation by enforcement. Garlinghouse criticizes the SEC for overstepping its jurisdiction and claims the agency created confusion in the crypto space.
Ripple chief legal officer Stuart Alderoty also said the SEC is pretending to have jurisdiction where there is none, calling it a political power play that ultimately harms everyone involved.
Players must be 21 years of age or older or reach the minimum age for gambling in their respective state and located in jurisdictions where online gambling is legal. Please play responsibly. Bet with your head, not over it. If you or someone you know has a gambling problem, and wants help, call or visit: (a) the Council on Compulsive Gambling of New Jersey at 1-800-Gambler or www.800gambler.org; or (b) Gamblers Anonymous at 855-2-CALL-GA or www.gamblersanonymous.org.
Trading financial products carries a high risk to your capital, especially trading leverage products such as CFDs. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
This site is using Cloudflare and adheres to the Google Safe Browsing Program. We adapted Google's Privacy Guidelines to keep your data safe at all times.
Crypto Gambling is not available at your location.
For US visitors, we recommend playing at Stake.us Social Casino instead.