Key Takeaways:
The US Securities and Exchange Commission (SEC) has filed a notice of appeal challenging some aspects of the court ruling in the long-standing Ripple lawsuit. The appeal was filed just days before the October 7 deadline.
In the particular ruling made in July, Judge Analisa Torres fined Ripple Labs $125 million for the unregistered sale of XRP tokens to institutional investors, which was deemed unlawful. However, the court found that the sale of XRP through cryptocurrency trading platforms was not a securities transaction, and the sale to institutional investors did not violate federal securities law.
SEC Appeals Court’s Decision To Acquit Ripple Labs of Wrongdoing In XRP Token Sale to Investors
Therefore, the premise of the SEC’s appeal can be attributed to Judge Torres’ ruling on the institutional sales or the penalty imposed on Ripple. While many thought the fine would bring an end to the three-year-long lawsuit, others suspected the regulator would still pursue an appeal against the court’s verdict.
Fox Business journalist Eleanor Terret said that a former lawyer from the SEC believed the agency is keen on proving that the outcome of Ripple’s programmatic XRP sales is incorrect, appealing the verdict that acquitted the blockchain-based payments firm from wrongdoing.
The date of the appeal is noteworthy, as it comes just five days before the deadline. This move will further elongate the case as the US Court of Appeals for the Second Circuit will now analyze the findings of the previous ruling.
Ripple CLO Calls The SEC’s Action A Litigation Warfare Against The Industry
Ripple’s Chief Legal Officer, Stuart Alderoty, voiced his frustration with the SEC’s decision to appeal the ruling. In an X post, he wrote that it is “disappointing, but not surprising”, and would prolong the “complete embarrassment” for the agency. He noted that the court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no fraud allegations, victims, or losses.
Alderoty criticized SEC chairman Gary Gensler for continuing to engage in “litigation warfare” against the industry. Ripple is preparing to file a cross-appeal, which would be wrapped into the same case heading to the US Court of Appeals. The CLO was insistent that the company would continue its defense and more so for the crypto industry.
Ripple CEO Brad Garlinghouse responded to the SEC’s decision by stating that the agency is squandering taxpayers’ funds on a “losing fight”. He noted that the Commission does not serve the interest of investors and is “acting in bad faith”, before adding that XRP’s status as a non-security for programmatic sales will remain unchanged despite the appeal.
Interestingly, the SEC’s Director of the Division of Enforcement, Gurbir Grewal, resigned merely an hour before the agency filed its appeal. Grewal’s departure has raised questions regarding the future of the Securities and Exchange Commission and its leadership. SEC chair Gary Gensler has long been under scrutiny over his handling of cryptocurrency enforcement.
Pro-XRP lawyer John Deaton echoed Garlinghouse by calling the SEC’s appeal a total waste of taxpayer money. He further stated that the appeal is a losing fight as the Second Circuit court will rule that the regulator did not establish a “common enterprise”, which is a key criterion for the Howey Test.
Meanwhile, former SEC lawyer Marc Fagel noted that the agency does not have enough evidence to prove that Ripple’s promotional material was aimed at buyers. Another ex-SEC lawyer, James Farrell, believes that the review standard of the appellate court could lead to a reevaluation of the evidence without considering Judge Torres’ findings.
XRP Price Declines, But Exchange-Traded Funds Could Be On The Way
Following news of the SEC’s notice of appeal on the Ripple lawsuit, the price of XRP was hit significantly, declining more than 10% in 24 hours.
Despite the dip, there was reason for optimism after crypto asset management firm Bitwise filed an initial registration statement on Form S-1 for an exchange-traded fund (ETF) tracking the price of Ripple (XRP), signalling growing interest for the cryptocurrency.
Crypto analyst CredibleCrypto says Ripple could be next in line after Bitcoin and Ethereum to receive an approval to be listed as an ETF in the US market. He believes that the ongoing legal case is unlikely to affect XRP’s market trajectory in the long run.
At the time of writing, XRP is trading at $0.5161 – down 14.29% in the last 24 hours.
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