In December 2020, the Securities and Exchange Commission (SEC) initiated a legal battle against Ripple Labs and its founders. On October 2, the SEC filed a notice of appeal in the ongoing Ripple case, aiming to challenge the decision made by Judge Analisa Torres.
Legal professionals had predicted the regulatory body's appeal following the 2023 judgment that concluded secondary transactions of Ripple’s XRP do not qualify as sales of securities.
Judge Torres determined that XRP itself did not meet the criteria to be classified as a security, as it did not fulfill all the requirements of the SEC’s Howey test, which is used to define whether a financial asset can be considered an investment contract.
Consequently, Torres stated that secondary transfers of XRP cannot be deemed as unregistered securities transactions. However, she did find that early sales carried out by Ripple’s founders to institutional investors were indeed regarded as securities sales, due to the nature of how those deals were executed.
This ruling was celebrated as a substantial triumph for Ripple Labs and the cryptocurrency sector at large during that period.
SEC Enforcement Chief Announcement
Coinciding with the appeal notice, the SEC revealed that its enforcement chief, Gubir Grewal, will depart from his position on October 11. Grewal has faced significant scrutiny for implementing harsh enforcement measures against the cryptocurrency industry, proposing over 100 distinct enforcement actions during his time in office.
Currently, there is no official successor to Grewal, but Sanjay Wadhwa, the deputy director of the SEC's enforcement division, has been appointed as the acting chief enforcement officer while the agency searches for a permanent replacement.
Bitwise Seeks XRP ETF Trust
Institutional interest in XRP appears to be on the rise. As reported by Cointelegraph, Bitwise submitted an application for an XRP ETF trust in Delaware on September 30. This filing, which was posted on the state’s Division of Corporations website, suggests the company is looking to launch an XRP ETF.
However, it's important to note that the initial application in Delaware is not submitted to the SEC, and with the recent appeal, SEC approval for the XRP trust could experience delays.
The ripple effect of regulatory actions and legal rulings continues to shape the landscape of the cryptocurrency market. The SEC's ongoing scrutiny of digital assets further highlights the necessity for innovation within the regulatory framework to adapt to the evolving nature of finance. As institutions like Bitwise explore XRP-related products, the resulting implications for market dynamics and investor confidence are worth monitoring closely.
