SEC’s Appeal Against Ripple Centers Around Sales, Not Status of XRP as a Non-Security
The United States Securities and Exchange Commission has continued to argue its case against Ripple Labs by filing an appeal this month, dated October 17, 2024. The new appeal fights against Ripple’s sales practices but noticeably doesn’t touch upon the status of XRP as a non-security.
Ripple is a blockchain-based payment firm that has been at the heart of regulatory scrutiny since 2020, when the SEC first filed charges against the company for allegedly selling XRP in violation of securities laws. Until a July 2023 ruling seemed to turn things a little in favor of Ripple after an apparent shift in the legal dynamic. In this ruling, U.S. District Judge Analisa Torres found that sales of XRP to retail investors did not constitute securities transactions-handing Ripple a partial win. However, it branded Ripple’s institutional sales as against the securities laws and fined it $125 million.
SEC Appeal: Ripple Sales and Executive Involvement, A Disaster?
It has to be noted that the appeal by the SEC does not dispute the ruling that XRP itself is not a security when sold in retail exchanges, which is a key aspect placed much emphasis on by the crypto industry. It actually cites Ripple’s programmatic sales of XRP on digital platforms, sales conducted by its executives such as CEO Brad Garlinghouse and co-founder Chris Larsen, and the distributions of XRP that were exchanged for services rather than cash.
The appeal seeks a de novo review of these specific legal issues. This means that the appellate court will review the legal issues presented in the case without showing deference to the lower court’s decision. It is the view of the SEC that the lower court “erroneously” ruled in favor of Ripple on those points and is seeking to reverse these decisions.
Implications for Ripple and the Crypto Industry
The appeal restarts a legal battle that many had presumed was settled in July with Judge Torres’s decision. In the event of an SEC win, Ripple faces new fines or constraints on its sales practices. The regulatory body also seeks to reinstate the charges of aiding and abetting against Garlinghouse and Larsen that were dismissed in the prior ruling.
This, however, is not a point of great concern for the greater crypto community, which remains abreast of other issues. The main ruling that XRP is not a security stands, and that has already been enough to spur many major cryptocurrency exchanges into allowing the relisting of XRP, significantly boosting its market position.
What’s Next for Ripple?
With that said, the lawsuit could drag further into 2026. But Ripple’s legal team still feels positive in that the substantive decision of XRP’s non-security status would remain critical to its defense. The company disclosed intentions for their cross-appeal to be filed, which argues against the 125 million dollars penalty for institutional sales.
For the present, nevertheless, XRP is holding its ground in the market with new hopes opened for the digital currency amidst the continuous legal impediments from the SEC.
