SEC to Appeal Ruling on XRP in Ripple Case

The U.S. securities regulator plans to appeal a federal judge’s ruling that deemed programmatic sales of XRP through exchanges did not qualify as securities.

The U.S. Securities and Exchange Commission (SEC) intends to file an appeal against a recent ruling made by Judge Analisa Torres last month.

On July 13, Torres ruled that the sale of XRP tokens on exchanges could not be classified as a securities offering, and as such, did not violate securities laws. Meanwhile, she found that XRP sold to institutional investors would be considered securities. 

The SEC plans to contest part of that decision, according to a Wednesday court filing, where the regulator said it was seeking an interlocutory appeal against XRP-issuer Ripple Labs. 

“Specifically, the SEC seeks to certify the Court’s holding that Defendants’ ‘Programmatic’ offers and sales to XRP buyers over crypto asset trading platforms and Ripple’s ‘Other Distributions’ in exchange for labor and services did not involve the offer or sale of securities under [the Howey test],” said the SEC in its letter to Judge Torres.

According to Ripple Chief Legal Officer Stuart Alderoty, the SEC’s move to file an interlocutory appeal stems from the fact that they do not have the “right” to appeal just yet.

The SEC does not have the “right” to appeal just yet which is why they are asking permission to file an “interlocutory” appeal. Ripple will file its response with the Court next week. Stay tuned. https://t.co/zCeVZhYfxc

— Stuart Alderoty (@s_alderoty) August 9, 2023

An interlocutory appeal requires the SEC to seek approval from both the District and Circuit court within a relatively short time frame. Alternatively, the regulator would have to wait for the trial to conclude before filing a formal appeal – a process that would likely take years, according to Ripple CEO Brad Garlinghouse.

However, with a number of ongoing enforcement actions in play against several crypto firms, including Coinbase and Binance, which are also contingent on whether or not the underlying crypto assets in question are, in fact, unregistered securities, the XRP ruling could set forth a precedent that works against the SEC.

The SEC appears to be acutely aware of this fact, noting in its letter to Judge Torres that the ruling is of “particular consequence” to its enforcement of securities laws and to “a large number of pending litigations.”

Ripple has until Aug. 16 to respond to the letter and the SEC has proposed filing an opening brief outlining the appeal on Aug. 18.