The U.S. Securities and Exchange Commission (SEC) has initiated an appeal in its ongoing legal battle with Ripple Labs, specifically targeting the company's sales methods and the participation of its executives. This move comes after a previous court ruling that affirmed XRP's status as a non-security, thereby sparing it from certain regulatory constraints.
The SEC's appeal, filed on October 17, 2024, centers not on XRP's classification but rather on the company's sales operations, including both programmatic sales conducted through digital asset platforms and transactions executed by Ripple’s executives, Brad Garlinghouse and Chris Larsen. The SEC aims to review these elements "de novo," meaning that the appellate court will reconsider the legal issues without being influenced by the original court's decisions.
In a ruling issued by U.S. District Judge Analisa Torres in July 2023, it was determined that sales of XRP to retail customers were not securities transactions under existing U.S. law. Nonetheless, institutional sales of XRP were found to violate securities regulations, resulting in a $125 million penalty for Ripple associated with unregistered securities offerings.
The SEC's appeal does not contest the favorable ruling on retail sales of XRP, leaving that aspect intact. Still, it indicates the regulatory body's intent to challenge the court’s decision about Ripple's broader sales framework and the roles of its top executives.
Stuart Alderoty, Ripple’s Chief Legal Officer, swiftly reacted to the SEC’s appeal, emphasizing that the critical ruling declaring XRP as a non-security has not been contested by the SEC, which is a primary focus for Ripple and its supporters.
Impact on Ripple and the Broader Crypto Landscape
The SEC's latest legal maneuver extends a dispute that many believed had reached closure following Judge Torres's ruling in July. Should the SEC prevail in its appeal, Ripple could see further penalties or operational limitations placed on its sales and distribution practices. Additionally, the regulatory body is seeking to reinstate aiding and abetting charges against Ripple’s executives, which had been previously dismissed.
Despite the continuation of the legal saga, segments of the cryptocurrency community remain optimistic, celebrating the court's earlier decision. Ripple's partial victory has already led to major exchanges reinstating XRP, which had been removed from platforms during early stages of the litigation. As a result, XRP has gained significant traction in the market, with various analysts and crypto influencers, such as Ben Armstrong (also known as BitBoy), voicing confidence in the token's prospects moving forward. Armstrong recently asserted that XRP was poised to "still moon," regardless of the ongoing regulatory pressures.
Notably, the SEC’s language in its latest filing, referring to XRP as a "crypto asset" rather than labeling it as a "crypto asset security," suggests a shift in the regulatory stance regarding its classification. This issue was a central topic when the lawsuit commenced four years ago.
As the case unfolds, the outcome of the SEC's appeal could have lasting implications, potentially dragging the legal proceedings into 2026. Additionally, Ripple is preparing a cross-appeal to contest the $125 million fine related to its institutional sales. According to Alderoty, Ripple plans to file Form C for this cross-appeal next week, signaling its intent to actively manage its legal challenges.
In summary, the ongoing judicial contest between the SEC and Ripple highlights the complex nature of cryptocurrency regulation in the U.S. and the significant implications such cases can have on the functioning and perception of the crypto market.
