Last week saw New York District Judge Analisa Torres reject the Securities and Exchange Commission’s (SEC) request for an interlocutory appeal in its ongoing battle against Ripple Labs (XRP).
For context, Ripple Labs’ native XRP token was deemed ‘not a security’ by Torres back in July - where as previously reported, this opened up a fresh can of worms with regards to crypto projects selling tokens to institutional investors.
Further, although this recent rejection indicates another win for Ripple and crypto, it also marks just another stage in what may be a multi-year war between the two entities.
The Appeal Denial
Per the words of Judge Torres last week, the courts denied the SEC’s interlocutory appeal on the following grounds:
“The Court held that based on the totality of the circumstances in this case, including an examination of the facts, circumstances, and economic realities of the transactions, Ripple’s Programmatic Sales could not lead investors to reasonably expect profits from Ripple’s efforts”- Judge Analisa Torres.
For more context, the Howey Test (i.e. the test for determining whether an asset is a security or not) requires securities to entail ‘reasonable expectations of profits’… an element in which Torres deemed not to be present in many (but not all) sales of XRP.
Further, Torres’ words then went on to state that “although the record may have demonstrated that many Programmatic Buyers purchased XRP with an expectation of profit,” the SEC was unable to provide sufficient evidence regarding this matter.
In turn, the power of her initial ruling, paired with the lack of evidence, prompted this interlocutory appeal denial.
SEC Vs. XRP: What Could Happen Now
After the judicial denial swept its way across the crypto space, onlookers with legal authority began flocking to the matter, such as Attorney Jeremy Hogan.
Here Hogan took to Twitter (X) to outline the possible outcomes for Ripple and the SEC moving forwards. For starters, he stated that this is only an ‘early’ appeal denial, and that the SEC has the right to appeal when a ‘Final Judgement’ is made.
Whilst giving a possibility of almost 40%, he then proposes the prospect of the SEC moving forwards with a trial next year against the individual defendants (i.e. Ripple Labs’ executives Brad Garlinghouse and Chris Larsen). That being said, he then stated that this would likely end in an ‘L’ for the SEC, with ‘some of its dirty laundry’ also being aired in the process.
If done, an appeal of the case wouldn’t be likely until 2025 - where come its likely loss, the SEC then may want to appeal particular areas of the judgement, which could then lead to a Final Judgement being made in 2027 (i.e. very costly and drawn-out process).
With a slightly lower possibility of happening (32%), the SEC could also settle its case against Garlinghouse and Lar whilst continuing its pursuit against Ripple (the company). This 2026-resolved decision is something that Hogan tipped as the SEC’s best choice (which is therefore a reason why he thinks that it won’t do it).
The final possibility revolves around the SEC settling all litigation against Ripple and the individual defendants - a compromise that it’s not shown much commitment towards thus far. Such a decision would result in the SEC being able to publish another ‘win’ by taking money from its opposition.
SEC vs Coinbase Impacts
Another consensus around the case is that a drawn-out dynamic will be advantageous to the Ripple exec duo. This is because the ruling of the SEC vs Coinbase, as well as the US Presidential Election, may have positive bearings on their chances of success.
For context, the SEC charged Coinbase for allegedly operating as an unregistered securities exchange, broker, and clearing agency (among other charges). Further, if unsuccessful in this similar onslaught, then the SEC will most probably have to settle with Ripple.
On the election side of things, if a Republican Party victory is observed, then many believe that the SEC’s anti-crypto crackdown will be put to a complete halt (alongside a plethora of other crypto-bullish measures).
Conclusion
Whilst the legal antics of the SEC and Ripple remain up in the air, for now, “The Court’s July 13 ruling was, and remains, the law of the land. XRP is not a security”. This is something stated by onlooking Chief Legal Officer Stuart Alderoty, who also went on to call the ruling ‘untouchable’.
After facing minor depreciations on both Saturday and Sunday amongst its court antics, XRP is currently trading for around $0.49. This is almost a 50% drop from its value of $0.82 which came in wake of Torres’ landmark ruling back in July.
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This article is intended for educational purposes and is not financial advice.
