Ripple Labs Receives Support from Crypto Lawyer in SEC Appeal
In the ongoing legal battle between Ripple Labs and the Securities and Exchange Commission (SEC), an appeal from the SEC is not considered a significant setback for Ripple, according to crypto lawyer John Deaton. Deaton’s remarks came after a claim on Twitter suggested that the appeal could be detrimental to Ripple’s recent courtroom victory.
Earlier this month, federal district judge Analisa Torres ruled that XRP, the token powering Ripple’s payments network, is not necessarily a security, except when it was sold to institutions for fundraising purposes. This decision has far-reaching implications for other tokens facing regulatory scrutiny.
SEC Chair Gary Gensler expressed disappointment with aspects of the ruling and court documents filed by the SEC in a separate case against Terraform Labs indicated the possibility of an appeal in the Ripple case. However, Deaton, the founder of Crypto Law, explained that even if an appeal is filed, it would take a significant amount of time for the case to progress through the court system. He believes that the Torres Decision, which ruled in favor of Ripple, is the law until a decision is issued by the 2nd Circuit, likely two years from now.
Torres’ ruling stated that programmatic sales of XRP to public buyers did not meet the Howey Test, which determines if an investment contract exists. Torres argued that there was no reasonable expectation of profits derived from Ripple’s efforts, as buyers were unaware they were purchasing XRP from Ripple.
Deaton further elaborated that even if the SEC challenges Torres’ application of the Howey Test, there are other factors to consider. These include the “investment of money” and the existence of a “common enterprise,” which are more difficult for the SEC to satisfy.
Ripple CEO Brad Garlinghouse hailed Torres’ ruling as a win for Ripple and the crypto industry in the United States. He criticized the SEC for trying to be the lead regulator of digital assets without legal jurisdiction. Ripple’s Chief Legal Officer, Stuart Alderoty, supported Garlinghouse’s view, claiming that the SEC’s jurisdiction is limited to securities and pretending otherwise is a political power play that harms everyone.
The legal battle between Ripple and the SEC has significant implications for the regulation of cryptocurrencies and the determination of securities status. The outcome of the appeal, if it proceeds, will be closely watched by the crypto industry and regulatory bodies alike.