SEC Plans to Appeal Court Decision in Ripple Labs Case, Citing “Substantial Ground for Differences of Opinion”
NEW YORK (Reuters) – The U.S. Securities and Exchange Commission (SEC) intends to appeal a recent court ruling involving cryptocurrency firm Ripple Labs, marking a setback for the agency’s oversight efforts in the cryptocurrency market.
In a letter sent on Wednesday, the SEC requested U.S. District Judge Analisa Torres in Manhattan to allow a federal appeals court to review her July 13 decision. Judge Torres had stated that Ripple’s sale of its XRP digital token on public exchanges complied with federal securities laws.
The SEC argued that an appeal could address legal issues where there was “substantial ground for differences of opinion.” The agency emphasized that the outcome of an appeal would have significant consequences for its ability to enforce securities laws and would impact a “large number” of other ongoing lawsuits.
For years, the SEC has maintained that digital assets like cryptocurrencies should be classified as securities and fall under its regulatory purview, similar to stocks and bonds. In December 2020, the SEC filed a lawsuit against Ripple Labs, accusing the firm, Chief Executive Brad Garlinghouse, and co-founder and Chairman Chris Larsen of unlawfully raising over $1.3 billion through the unregistered sale of XRP.
Contrary to the SEC’s claims, Judge Torres ruled that Ripple did not violate the law when it sold the XRP token on public exchanges because buyers did not have a reasonable expectation of profit based on Ripple’s efforts.
However, U.S. District Judge Jed Rakoff, who serves on the same court as Judge Torres, ruled differently just 18 days later. Judge Rakoff stated that the Terra USD token offered by Terraform Labs qualified as a security when sold on public exchanges.
It is important to note that while Judge Torres’ decision was not a complete victory for Ripple, as she found the firm to be in violation of securities laws when selling XRP to institutional investors.
The next step in this case is for Judge Torres to decide whether to allow the SEC to appeal her decision and put the case on hold.
Requests for comments from Ripple, Garlinghouse, Larsen, and their legal representatives were not immediately answered.
Under the leadership of Chairman Gary Gensler, the SEC has taken over 100 enforcement actions related to cryptocurrency, although many have been resolved through settlements. Gensler has also made efforts to rein in speculative activities in the cryptocurrency sector, citing concerns about these behaviors undermining investor trust in U.S. capital markets.
It is worth noting that the Ripple and Terraform cases do not directly impact the separate SEC lawsuit against Coinbase, the largest U.S. cryptocurrency platform, which accuses the company of operating illegally due to its failure to register as an exchange.
Additionally, the SEC is currently engaged in a legal battle with Binance, the world’s largest cryptocurrency platform.
Reporting by Jonathan Stempel in New York; Additional reporting by Chris Prentice and Jody Godoy; Editing by Chris Reese, Lisa Shumaker, and Diane Craft