The US SEC has filed an appeal in the Ripple lawsuit, challenging the district court’s July 2023 decision that XRP transactions don’t qualify as “investment contracts”.
On Wednesday, January 15, the US Securities and Exchange Commission (SEC) filed an appeal in the ongoing Ripple lawsuit challenging the court ruling of July 2023. The recent filing by the SEC stresses whether Ripple’s XRP XRP $2.23 24h volatility: 3.0% Market cap: $130.43 B Vol. 24h: $2.52 B sales to retail investors qualify as unregistered securities as per the federal securities laws. Top industry leaders have slammed the SEC for continuing to pursue the Ripple lawsuit with the same arguments despite rejection from the court.
In its filing on Wednesday, the SEC asked the appellate court to overturn the district court’s ruling regarding XRP transactions. The earlier decision found that transactions involving XRP purchased by public investors through crypto trading platforms did not qualify as “investment contracts” under the Howey test. The court reasoned that investors were unaware of whether Ripple Labs was the seller.
However, the securities regulator is willing to overturn this ruling. The SEC argues that Ripple’s promotional efforts fostered an expectation of profits among investors, thereby classifying XRP as an investment contract under the Howey test.
Note that the regulator had already filed its appeal last year in mid-October. However, Wednesday’s opening brief is a formal step in the appellate process with the securities regulator challenging the court ruling.
The agency had further challenged the district court’s ruling noting that sales on crypto exchanges do not meet these standards. US SEC also stressed that the investor expectations are based on the issuer’s actions, not the seller’s identity.
Ripple Executives and Crypto Industry Leaders Slam US SEC
Ripple executives and other industry leaders have slammed the US SEC for pushing its same old rhetoric. Company CEO Brad Garlinghouse called it “one definition of insanity stating that the SEC is doing the same thing over and over again while expecting different results. “Gensler’s SEC really took this to heart,” he said. On the other hand, Ripple’s Chief Legal Officer Stuart Alderoty stated:
“As expected, the SEC’s appeal brief is a rehash of already failed arguments –and likely to be abandoned by the next administration. We’ll respond formally in due time. For now, know this: the SEC’s lawsuit is just noise. A new era of pro-innovation regulation is coming, and Ripple is thriving.”
Pro-Ripple attorney Bill Morgan criticized the SEC’s stance on the case, calling it “absolute garbage” and accusing the agency of a lack of understanding of how crypto markets operate and influence price movements.
Morgan argued that price increases in the crypto market typically occur in tandem with broader market trends, such as Bitcoin’s price rise, and are not driven by the promotional efforts of individual issuers.
Ripple’s native crypto XRP has continued to gain further momentum crossing $3.0 for the first time since 2018. In the last 24 hours, the XRP price gained another 9.43% with its market cap crossing $176 billion and daily trading volume surging 67% to $22.69 billion.
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