- The SEC has confirmed it will challenge a federal judge’s ruling on whether Ripple’sXRP token qualifies as a security when sold to the general public
- Judge Analisa Torres previously ruled that only XRP sales to sophisticated investors met the criteria for an investment contract under federal securities law
- The SEC’s move will impact pending cases, including those against Coinbase and Binance
The U.S. Securities and Exchange Commission (SEC) has announced its intent to contest a recent federal court ruling on the status of Ripple’s XRP token as a security. This decision follows a judgment by US District Judge Analisa Torres last month, which classified XRP sales to sophisticated investors as investment contracts under federal securities law, excluding public buyers on cryptocurrency exchanges. However, the SEC will challenge Torres’ ruling, saying that she erred when applying securities laws.
Many Believe That Ruling Was Wrong
Ripple won the crucial elements of its case against the SEC last month, but almost everyone involved on both sides expected an appeal, with many experienced heads saying that Torres was incorrect in her application of the law and that the SEC would win second time round.
The agency highlighted that the recent ruling favoring XRP’s retail sales resolved crucial legal aspects, leading to the dismissal of over half of the claims tied to XRP offers and sales. While the appeal may extend the Ripple case timeline, the SEC contends that promptly addressing legal uncertainties through an appeal is more efficient than post-trial resolutions.
According to some sources, the date has already been decided on:
The court plans to schedule a jury trial in the Southern District of New York in the Q2 of next year for whether Ripple CEO Brad Garlinghouse and Chris Larsen are liable in the illegal sale of XRP securities.
The U.S. SEC said on Wednesday that it plans to challenge and appeal…
— Wu Blockchain (@WuBlockchain) August 10, 2023
The appeal’s outcome could also impact the ongoing SEC case against Binance Holdings Ltd. and CEO Changpeng Zhao, who are accused of securities violations. Given that Judge Torres’s ruling did not conclude the Ripple case, the SEC needs her permission for an immediate appeal, requiring a demonstration of significant legal issues and divergent opinions.
Same Court Ruled LUNA a Security
The SEC has also noted that another judge in the same court as the Ripple case took a contrary stance to Judge Torres, deeming Terraform Labs’ LUNA token a security when sold to retail investors.
While the appeal might prolong the Ripple case, the SEC contends that addressing legal uncertainties promptly through an appeal is more efficient than post-trial resolutions. The upcoming appeal could significantly influence cryptocurrency regulation and establish a precedent for classifying digital tokens as securities.
