The ongoing legal dispute between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has entered a new phase as the SEC officially filed an appeal against a significant ruling made in July 2023.
In a groundbreaking decision, Judge Analisa Torres differentiated between various XRP transactions, concluding that exchanges’ transactions did not qualify as securities. On the other hand, sales to institutional investors were categorized as such.
Although Ripple was directed to pay a $125 million penalty for selling XRP to institutions, the SEC is now challenging the court’s stance on transactions in the secondary market.
By applying the Howey Test, the SEC contends that Ripple’s promotional efforts created profit expectations among investors, framing XRP as an investment contract.
What Prompted the SEC’s Decision to Appeal?
The SEC argued that investor expectations were shaped by the actions of the issuer rather than the seller’s identity, asserting that Ripple’s distribution of XRP, including non-monetary transactions like employee compensations and business incentives, aligns with the “investment of money” requirement under the Howey framework.
It is notable that these developments are unfolding against the backdrop of anticipated changes in the SEC’s leadership. Despite this, the SEC has stood its ground, showing no signs of postponing its pursuit of the case, as verified by Stuart Alderoty, Ripple’s Chief Legal Officer.
Ripple Labs’ Disapproval of the SEC’s Actions
Ripple’s leadership was quick to voice its disapproval of the SEC’s decision to appeal the recent legal setback it faced.
Recently, Alderoty criticized the move, referring to it as a “misuse of taxpayer funds,” underscoring the firm’s increasing frustration with the SEC’s persistent enforcement measures.
He stated,
“On January 20, Gensler’s crackdown on crypto will cease at the SEC. We requested the SEC to agree to extend the deadline for filing their opening brief in our victory appeal (due on Jan 15) – but they declined. What a pointless waste of time and taxpayer resources!”
Could Trump Affect the SEC vs. Ripple Legal Dispute?
These events coincide with high-ranking Republican officials at the SEC gearing up to overhaul the agency’s approach to cryptocurrency regulations, potentially signaling a notable policy shift.
Sources suggest that commissioners Hester Peirce and Mark Uyeda are contemplating introducing clearer standards for classifying cryptocurrencies as securities and revisiting ongoing crypto enforcement cases.
With Paul Atkins set to assume the chairmanship under President Donald Trump, there is growing speculation that the stringent regulatory stance spearheaded by Gary Gensler may soon relax.
Nevertheless, the Senate’s confirmation of Atkins is a critical factor in determining the timeline for these prospective changes.
XRP’s Market Activity
Despite the SEC’s persistent efforts to challenge prior rulings, XRP has demonstrated resilience in the market. According to CoinMarketCap, XRP was trading at $3.08 at the time of reporting, marking a 9.21% surge over the last 24 hours.
Interestingly, XRP’s price surged even after the SEC lodged a ‘Civil Appeal Pre-Argument Statement’ on October 17, signaling its commitment to advancing the legal battle.
While the token experienced some short-term fluctuations amidst these developments, the broader market sentiment toward XRP has remained positive.