The ongoing legal saga between Ripple Labs and the US Securities and Exchange Commission is heating up again as speculation mounts about a potential appeal from the SEC.
This comes after Judge Analisa Torres rendered a landmark decision in July 2023, finding that Ripple’s programmatic sales of XRP to ordinary investors did not breach securities laws.
The SEC, however, is apparently not happy with this ruling, especially in light of how it would affect any future regulatory proceedings.
The Potential Appeal Of The SEC
Journalist Eleanor Terrett of FOX Business recently shared observations from a former SEC attorney who thinks the agency will probably file an appeal of the decision.
Many others within the SEC, according to this attorney, believe the ruling has basic flaws and ought to be overturned. There is additional urgency because October 7 is the deadline for filing such an appeal.
🚨NEW: A former @SECGov lawyer who recently left the agency tells me the SEC will ‘probably’ appeal Judge Torres’s July 2023 ruling concerning the $XRP programmatic sales in the @Ripple case partly because: “everyone over there [at the SEC] truly believes that the decision is…
— Eleanor Terrett (@EleanorTerrett) September 26, 2024
The SEC would probably be more interested in reversing the portion of the order that deals with XRP programmatic sales than in challenging Ripple’s $125 million fine.
Marc Fagel, a former attorney for the SEC, has also spoken, stating that in the event of an appeal, it will primarily focus on how these programmatic sales were determined to be in compliance with securities laws.
This strategic emphasis may have a significant impact on future cryptocurrency regulations. It is highly likely that there will be more court battles in the future, with experts like lawyer Fred Rispoli estimating a 75% possibility that the SEC will move forward with an appeal.
Ripple’s Response And Market Reactions
Regardless of these changes, Ripple’s leadership maintains their confidence. Indicating their conviction that the matter has come to a close, CEO Brad Garlinghouse and Chief Legal Officer Stuart Alderoty have publicly said that they do not plan to appeal the court’s decision.
They contend that more legal wrangling could jeopardize capital formation and investor trust, two important facets of the SEC’s mandate.
This uncertainty has pushed the price of XRP in the markets to a highly volatile movement. Though the movements remain still miniscule, XRP’s price remains stuck at about $0.59, far away from a significant deviation from the highs lately.
Awaiting an end to this uncertainty in form of a clarification, trading volumes have dropped due to the prospects that it may head to an appeal.
US Senate Candidate: Appeal Will Fail
Meanwhile, Atty. John Deaton, a candidate for Massachusetts Senate, has offered opinions on the Ripple issue, expressing belief that an appeal of the ruling would not be successful. Deaton, who was instrumental in Ripple’s legal victory about programmatic sales, thinks the Second Circuit Court is not likely to reverse the decision.
His point of view stems from the Howey Test application, in which he notes the judge concentrated on just the third prong—that of the “expectation of rewards based on the efforts of others.”
Deaton said, referencing the affidavits of 3,800 XRP holders, Judge Torres appropriately used the third element in her ruling.
These testimonials undermined the assertion that Ripple’s programmatic sales constituted an investment contract by supporting Ripple’s position—that XRP investors did not expect gains based on the company’s efforts. Deaton therefore feels sure the Second Circuit would not overturn the decision.
Featured image from WIRED, chart from TradingView