The ongoing legal saga between Ripple Labs and the US Securities and Exchange Commission flares up again as speculation mounts about a possible appeal from the SEC.
This comes after Judge Analisa Torres issued a landmark decision in July 2023, ruling that Ripple’s programmatic sale of XRP to ordinary investors did not violate securities laws.
However, the SEC is apparently not happy with this ruling, especially in light of the implications it would have for any future regulatory proceedings.
The potential appeal of the SEC
Journalist Eleanor Terrett of FOX Business recently shared observations from a former SEC attorney who thinks the agency is likely to do this. file an appeal of the decision.
According to this attorney, many others within the SEC believe the ruling is fundamentally flawed and should be overturned. There is extra urgency because October 7 is the deadline for submitting such an appeal.
🚨NEW: A former one @SECGov The attorney who recently left the firm tells me the SEC will “likely” appeal Judge Torres’ July 2023 ruling on the $XRP programmatic sales in the @Ripple partly because: “everyone there (at the SEC) really believes the decision…
—Eleanor Terrett (@EleanorTerrett) September 26, 2024
The SEC would likely be more interested in reversing the portion of the order related to programmatic sales of XRP than in challenging Ripple’s $125 million fine.
Marc Fagel, a former SEC attorney, has also spoken and stated that in the event of an appeal, it will primarily focus on how these programmatic sales were found to comply with securities laws.
This strategic emphasis could have a significant impact on future cryptocurrency regulations. It’s highly likely that there will be more lawsuits in the future, with experts like attorney Fred Rispoli estimating a 75% chance that the SEC will appeal.
Ripple’s reaction and market reactions
Regardless of these changes, Ripple’s leadership maintains their confidence. CEO Brad Garlinghouse and Chief Legal Officer Stuart Alderoty have signaled their belief that the case has been resolved and have said publicly that they do not intend to appeal the court’s decision.
They argue that more legal wrangling could jeopardize capital formation and investor confidence, two key facets of the SEC’s mandate.
This uncertainty has pushed the price of XRP to a level on the markets very volatile movement. While the moves are still minuscule, the price of XRP is stuck at around $0.59, far from a significant departure from the highs of late.
While waiting for this uncertainty to end in the form of clarification, trading volumes have fallen due to the prospects that this could lead to an appeal.
Candidate for US Senate: Appeal will fail
Meanwhile, Atty. John Deaton, a candidate for the Massachusetts Senate, has given his opinion on the Ripple issue, expressing his belief that an appeal against the ruling would not be successful. Deaton, who was instrumental in Ripple’s legal victory in programmatic selling, thinks the Second Circuit Court is unlikely to reverse the decision.
His position arises from the Howey Test application, in which he notes that the judge focused only on the third point: that of the ‘expectation of rewards based on the efforts of others’.
Deaton said, citing the affidavits of 3,800 XRP holders, that Judge Torres appropriately used the third element in her ruling.
These testimonies undermined the claim that Ripple’s programmatic sales constituted an investment contract by supporting Ripple’s position – that XRP investors did not expect to make a profit based on the company’s efforts. Deaton is therefore confident that the Second Circuit will not reverse the decision.
Featured image from WIRED, chart from TradingView