Many XRP investors were initially concerned that the SEC might challenge XRP’s classification as a non-security, which could have had significant implications for the cryptocurrency market. However, the appeal does not dispute the court’s earlier decision that XRP sales to retail investors via exchanges are not considered securities. This comes as a relief for the XRP community, as it maintains a legal advantage throughout the appeals process.
The SEC is instead focusing its appeal on other key aspects of the ruling, specifically targeting the personal sales of XRP by Ripple CEO Bradley Garlinghouse and Executive Chairman Chris Larsen. Judge Torres’ July 2023 ruling had concluded that these sales, as well as Ripple’s offers of XRP on digital asset platforms, did not violate securities laws.
Ripple’s Legal Battle with the SEC
The original decision by Judge Torres dealt a significant blow to the SEC’s attempts to regulate crypto sales under traditional securities laws. The court found that Ripple’s sales of XRP to retail investors did not meet the legal criteria for an investment contract. The SEC’s appeal now focuses on whether the district court erroneously granted partial summary judgment regarding Ripple’s offers of XRP on trading platforms, as well as the personal sales made by Garlinghouse and Larsen.
The SEC’s Form C reads: “Whether the district court erroneously granted partial summary judgment in favor of defendants with respect to Ripple’s offers and sales of XRP on digital asset trading platforms (and Garlinghouse’s and Larsen’s aiding and abetting of those offers and sales).” This means the appellate court will reassess these legal issues without relying on the previous interpretations made by the district court.
XRP’s Non-Security Status Remains Intact
Ripple’s Chief Legal Officer, Stuart Alderoty, addressed the SEC’s appeal in a post on X (formerly Twitter), assuring that the agency is not contesting XRP’s status as a non-security. Alderoty emphasized that this decision remains “the law of the land.” Ripple has also confirmed that it plans to file its own Form C in response, further defending its stance in the legal battle.
Judge Torres’ final judgment in August 2023 included an injunction prohibiting Ripple from violating Section 5 of the Securities Act of 1933, along with a $125 million fine. Despite the ongoing appeal, XRP holders can be reassured that the cryptocurrency’s legal status remains secure, with the SEC’s primary focus now on Ripple’s executive leadership.
What’s Next for Ripple and XRP?
The appeals process is expected to be lengthy, potentially lasting over a year. A three-judge panel will hear the case, and final rulings could have wide-reaching implications for future cryptocurrency regulation. For now, XRP prices have remained stable, trading at around $0.549, down slightly by 1.28% for the day, but still up by 1.9% over the past week.
As the legal battle between the SEC and Ripple continues to unfold, the cryptocurrency world will be watching closely to see how the outcome might shape the future of digital asset regulation in the United States.