Étienne Girard
The U.S. Securities and Exchange Commission (SEC) has filed a late-stage appeal in its ongoing legal battle with Ripple Labs, seeking to reverse parts of a summary judgment issued by U.S. District Judge Analisa Torres over a year ago.
In July 2023, Judge Torres ruled in favor of Ripple, determining that its sales of XRP to retail investors on digital asset platforms did not violate U.S. securities laws. The court concluded that these transactions did not meet the legal definition of an investment contract, marking a setback for the commission’s efforts to regulate cryptocurrency sales under current securities regulations.
Filed in the U.S. Court of Appeals for the Second Circuit on Thursday, the commission’s appeal does not challenge the decision that XRP sales to retail investors through exchanges are not securities. Instead, the agency is contesting other parts of the ruling, focusing on Ripple’s offers and sales of XRP on digital trading platforms, as well as personal sales by Ripple executives Bradley Garlinghouse and Christian Larsen, which the court previously ruled did not breach securities laws.
Additionally, the U.S. Securities and Exchange Commission is appealing the court’s finding that Ripple’s distribution of XRP in exchange for non-cash considerations did not violate securities regulations. However, institutional sales of XRP to large investors had already been ruled in violation of securities laws, resulting in a $125 million civil penalty for the company.
The appeal will be reviewed “de novo,” meaning the appellate court will reexamine the legal questions from scratch, without deferring to the district court’s earlier interpretations. The ruling on XRP’s retail sales remains unaffected by the appeal and stands as law.
There has been some controversy over the commission’s filing process. Social media users have pointed out that the SEC may have missed the 14-day deadline to submit its Form C, which is required to provide key details about the appeal. The form, dated October 16, was entered into the docket on October 17, leading some to question if the agency filed it on time. Decrypt attempted to contact the SEC for clarification but received no response. Ripple’s chief legal officer, Stuart Alderoty, addressed the situation on social media, emphasizing that the court’s ruling that “XRP is not a security” is not part of the appeal and remains intact.
