In the ongoing legal battle between Ripple and the US Securities and Exchange Commission (SEC), the regulator filed an “interlocutory appeal” yesterday, challenging Judge Analisa Torres’ ruling. The appeal letter has sparked a heated debate among legal experts, with some suggesting that the appeal could indirectly challenge XRP’s status as a non-security.
The SEC’s appeal, as outlined in their recent court filing, seeks to challenge the court’s holding that Ripple’s “programmatic” offers and sales to XRP buyers over crypto asset trading platforms and “other distributions” did not involve the offer or sale of securities under the Howey test. This comes after Judge Torres of the US Southern District Court ruled last month that while Ripple’s direct sales of XRP to institutional investors violated securities law, its programmatic sales to retail investors through exchanges did not.
Legal Experts Clash Over Intentions Of SEC in Ripple Case
Jeremy Hogan, a prominent lawyer in the XRP community, commented on the appeal, stating that the regulator is not challenging the ruling in regards to the fact that XRP itself is not a security. He tweeted:
AND… the SEC continues making questionable decisions, requesting an interlocutory appeal. Note that it is NOT appealing whether XRP itself is a security – just its losses on the programmatic and individual sales issues.
However, retired securities lawyer Marc Fagel disagreed with Hogan’s interpretation, saying, “I don’t think that quite captures it. They are appealing the holding (i.e., programmatic sales did not violate Section 5), and as part of that appeal they can challenge the reasoning that led to that holding.” Thus, Fagel argues that the SEC could choose a sneaky way to fend off the ruling that XRP itself is not a security.
But Hogan countered, emphasizing that the judge’s reasoning on programmatic sales not violating Section 5 was separate from her dicta that XRP is not a security. Fagel didn’t respond to this claim, so it’s not clear if Hogan could convince him.
In another Twitter conversation, crypto influencer “Moon Lambo” suggested that the Torres ruling on XRP programmatic sales is what led to XRP being a non-security and crypto exchanges relisting XRP. But once again Hogan clarified, “Two separate issues. XRP is not a security. Period. But if the SEC wins the appeal on sales, then Ripple couldn’t use exchanges to facilitate sales.”
Meanwhile, the motives behind the SEC’s appeal are not really clear yet. When probed about whether the SEC’s actions were about upholding the law or saving face, Fagel remarked, “I’ve been predicting an appeal because the Ripple ruling could be damaging to their current initiatives. Their goal should be judicial clarity.” He also acknowledged the substantial risk the SEC is taking, suggesting that a ruling against them by the 2nd Circuit would be a significant blow.
Thus, the SEC’s move to appeal part of the recent decision while other parts of the case proceed to trial has raised eyebrows. The regulator believes that approval of an interlocutory appeal could prevent the SEC and government from needing two trials.
The next steps in this legal saga are eagerly awaited by the XRP community. Ripple is expected to respond by August 16, 2023, and the SEC has proposed filing an opening brief on August 18.
At press time, the XRP was unimpressed by the SEC filing and traded at $0.6296.
Featured image from College Transitions, chart from TradingView.com
