SEC’s Ripple Appeal Focuses on Sales, Not Classification of XRP as Non-Security

The U.S. Securities and Exchange Commission (SEC) has initiated an appeal in its ongoing litigation against Ripple Labs. This appeal contests certain elements of the court’s prior ruling on sales but notably maintains XRP’s classification as a non-security.

This development adds another layer to the prominent case, with the SEC concentrating its appeal on Ripple’s sales methods and the roles of its executives, rather than challenging the overall designation of XRP as a non-security.

SEC Appeal: Ripple Sales and Executive Involvement, A Disaster?

In July 2023, U.S. District Judge Analisa Torres ruled in favor of Ripple, concluding that XRP sales to retail investors on digital asset platforms did not constitute securities transactions under U.S. law.

However, the court determined that Ripple’s institutional sales of XRP violated securities regulations, resulting in a $125 million penalty against Ripple for unregistered securities offerings.

The SEC’s appeal, submitted on October 17, 2024, does not dispute the ruling concerning XRP’s retail sales, which remains unchanged.

Instead, the SEC is focusing on specific elements of Ripple’s operations, including programmatic sales of XRP on digital platforms, transactions conducted by Ripple’s executives, Brad Garlinghouse and Chris Larsen, and distributions of XRP in exchange for services instead of cash.

According to the appeal document, the SEC seeks to address these “de novo” issues, indicating that the appellate court will review the legal questions anew without regard to the trial court’s findings.

The SEC contends that the district court “erroneously” ruled in favor of Ripple on these matters and is requesting the U.S. Court of Appeals for the Second Circuit to reevaluate the situation.

Ripple’s Chief Legal Officer, Stuart Alderoty, promptly responded to the SEC’s filing, highlighting that the crucial ruling affirming XRP’s non-security status remains unchallenged.

No surprises here — once again it’s been made clear. The Court’s ruling that “XRP is not a security” is NOT being appealed. That decision stands as the law of the land.
Stay tuned for Ripple’s Form C to be filed next week. https://t.co/m9molUGSBv

— Stuart Alderoty (@s_alderoty) October 18, 2024

Implications for Ripple and the Crypto Industry

The SEC’s appeal prolongs the legal conflict that many believed had concluded with Judge Torres’s ruling in July.

If the SEC succeeds in its appeal, Ripple may encounter further penalties or operational limitations regarding its sales and distribution practices.

The SEC also intends to reinstate the aiding and abetting charges against Ripple’s top executives, Garlinghouse and Larsen, which were previously dismissed.

Nevertheless, despite the ongoing legal disputes, the crypto community is focusing more on the favorable aspects of the case.

Ripple’s partial victory in 2023 has already facilitated major cryptocurrency exchanges to relist XRP, which had been removed during the earlier phases of the lawsuit.

Since then, XRP has regained traction in the market, with numerous investors and industry analysts, including crypto commentator Ben Armstrong (also known as BitBoy), expressing optimism regarding the token’s future performance.

Armstrong recently remarked that XRP would “still moon,” irrespective of the SEC’s continuing actions.

XRP Army – I understand there are people upset with the SEC Appealing combined with their gaffe of missing the deadline. And then magically they somehow got allowed two extra days.
No concern. It doesn’t matter. Remember. The issues in the appeal is all about $$$. We moon still

— The BitBoy (@BenArmstrongsX) October 18, 2024

Furthermore, the SEC’s choice to use the term “crypto asset” instead of “crypto asset security” in its recent filing further indicates that the regulatory body is no longer pursuing XRP’s classification as a security, a key issue when the lawsuit commenced four years ago.

The result of the SEC’s appeal, which could prolong the case until 2026, will determine whether Ripple faces any additional legal repercussions for its sales practices.

Ripple is also preparing its own cross-appeal, which may contest the $125 million penalty related to its institutional sales and potentially modify the extent of the penalties it faces.

In the interim, as Alderoty indicated, Ripple will submit Form C for a cross-appeal next week.

“Stay tuned for Ripple’s Form C to be filed next week.”

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