The legal showdown between the U.S. Securities and Exchange Commission (SEC) and Ripple Labs is far from over. On Thursday, the SEC took the next significant step in its ongoing appeal against a ruling that has become pivotal in the cryptocurrency landscape. The agency filed a “Civil Appeal Pre-Argument Statement,” commonly referred to as Form C, as it seeks to overturn parts of a previous judgment from the U.S. District Court for the Southern District of New York.
What Does The Appeal Entail?
The SEC’s appeal centers on whether the court made errors regarding Ripple CEO Brad Garlinghouse and co-founder Chris Larsen. Specifically, the agency is questioning the ruling that deemed some of Ripple’s XRP sales, particularly those executed on digital asset trading platforms, as compliant with securities laws. The SEC is asking the court to review these issues “de novo,” meaning it wants the court to reconsider the decision without being bound by the previous ruling.
In the appeal, the SEC outlined several critical issues for review, including whether the court erred in granting partial summary judgment favoring Ripple on aspects related to the sales of XRP. The focus is particularly on the personal offers and sales of XRP made by Garlinghouse and Larsen, as well as Ripple’s distribution of XRP in exchange for non-cash considerations.
Ripple’s Response
Ripple’s Chief Legal Officer, Stuart Alderoty, was quick to respond to the SEC’s move, stating that the firm plans to file its own Form C next week. He emphasized that the court’s prior ruling, which declared that “XRP is not a security,” is not being challenged in this appeal. “No surprises here,” Alderoty tweeted, asserting that the decision “stands as the law of the land.”
This back-and-forth began on October 2, when the SEC filed its initial appeal, claiming the district court’s ruling conflicts with established Supreme Court precedents regarding securities laws. An SEC spokesperson expressed their anticipation of presenting their case to the Second Circuit, reinforcing their stance that Ripple’s actions raised significant legal concerns.
In a strategic counteraction, Ripple filed a notice to cross-appeal shortly after the SEC’s initial appeal. Alderoty noted this was to ensure that no argument would be overlooked, specifically the assertion that an “investment contract” necessitates essential rights and obligations, which are typically outlined in a contract. This cross-appeal further complicates the legal battle, ensuring that both parties have a comprehensive case presented to the court.
The Historical Context
This ongoing legal saga traces back to December 2020, when the SEC accused Ripple of raising $1.3 billion through the sale of XRP, labeling it an unregistered security. In a landmark ruling last year, Judge Analisa Torres concluded that certain sales of XRP—specifically those conducted through a blind bid process—did not constitute violations of securities laws. However, she ruled that direct sales to institutional investors did fall under securities regulations, resulting in a $125 million fine for Ripple.
Also Read: Ripple’s CEO Reveals – RLUSD To Enhance XRP’s Liquidity By 30% While Tackling SEC Hurdles!
The Road Ahead
As this legal battle unfolds, the implications extend beyond Ripple and XRP, shaping the regulatory landscape for the entire cryptocurrency industry. The SEC’s aggressive approach underscores its commitment to defining and enforcing securities laws in a rapidly evolving digital asset space. Meanwhile, Ripple’s determination to uphold the favorable aspects of the ruling could set critical precedents for how cryptocurrencies are classified moving forward.
With both sides preparing for what promises to be an intense legal confrontation, the cryptocurrency community will be closely watching. The outcome may not only affect Ripple and XRP but could also influence regulatory practices and investor confidence across the entire crypto market. As the case progresses, one thing remains clear: the legal stakes are high, and the courtroom is poised to be a battleground for the future of cryptocurrency regulation in the United States.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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