If you’re up to date when it comes to the Securities and Exchange Commission (SEC) versus Ripple Labs case, you’ll know that it’s currently tipped in favour of the latter and its native XRP crypto token.
More specifically, July saw US District Judge Analisa Torres rule that Ripple Labs only violated federal securities laws when selling XRP to institutional investors, and that no violations were made when listing the token on crypto exchanges for the purpose of retail investment…
However in getting to the premise of this article, she also gave permission for the SEC to appeal her ruling.
The SEC Appeal Application
Per a court filing on Friday September 1st, Ripple is accusing the SEC of jumping the gun as it rushes to “appeal what it claims is a purely ‘legal question’ applicable to every digital-asset case”.
What this basically means is that Ripple doesn’t believe that July’s ruling, nor the SEC’s appeal, present any ‘controlling law questions’- and therefore that Torres’s initial ruling isn’t likely to be overturned.
As part of its defence against the appeal application, Ripple also argued that it ‘wouldn’t lead to a faster case resolution’.
Ultimately, proving that the case ‘could be resolved faster via an appeal,’ as well as presenting a ‘controlling question of law,’ are what’s needed to warrant an appeals court intervention- meaning with the absence of both, the SEC may once-again fall short in its onslaught against Ripple.
Ultimately, the SEC’s proposed appeal is being done with the intent of eventually overruling Torres’s decision that retail XRP sales haven’t violated securities laws.
If Torres signs-off on the bid, the matter will go to the Second Circuit Court of Appeals, where the SEC will then put together a convincing argument as to why the ruling should be overturned.
Although one may view this as a blind, hopeful, and perhaps desperate attempt by the SEC to make reconciliations after its first big ‘crypto loss,’ it appears that the regulator is referencing a contradicting ruling- from another of its crypto-related cases- to bolster its argument that XRP sales should be classified as ‘unregistered securities’ offerings.
More specifically, the SEC’s appeal application alludes to the ruling of Judge Jed Rakoff in the case between itself and Terraform Labs- i.e. the parent company of the now-crashed TerraUSD stablecoin and Terra (LUNA).
However, as you may have already guessed, the Terraform Labs case relates to "orchestrating a multi-billion dollar crypto asset securities fraud,” meaning by nature, there are a whole host of fundamentals and nuances that set the two cases apart.
This is something that Ripple pointed to in Friday’s filing, as it had this to say:
"This Court’s summary-judgement ruling relied on record evidence that Ripple made no 'promises or offers' to purchasers in Programmatic Sales…Terraform, by contrast, accepted the SEC’s allegations that Terraform and its founder promised all purchasers – those who bought directly from Terraform or from some other source – 'rates of returns of 19-20% on the coin owners’ initial investment.'"
Whilst- quite promisingly- it appears that the letter of the law is falling in crypto’s favour for now, who knows how or when this landmark debacle will finally end.
When it comes to dates, the SEC has a week (until Friday September 8th) to respond, however the actual trial between itself and Ripple Labs won’t take place until next year.
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This article is intended for educational purposes and is not financial advice.
