The Securities and Exchange Commission (SEC) of the United States will submit an “interlocutory appeal” of a judge’s decision on Ripple’s programmatic sales of XRP, the agency stated in a court filing on Wednesday. Seasoned lawyer James K. Filan revealed the news on X.
SEC stated that it wanted “leave to” appeal a portion of a recent verdict while other aspects of the SEC’s case were being tried. The SEC and the government may not require two trials if an interlocutory petition is granted, according to the regulator.
#XRPCommunity #SECGov v. #Ripple #XRP BREAKING: SEC Files Letter outlining its basis for filing a Motion for Leave to File an Interlocutory Appeal regarding “Programmatic” offers and sales to XRP buyers over trading platforms and Ripple’s “Other Distributions.”…
— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) August 9, 2023
SEC vs. Ripple Decision: Judge Torres Ruled XRP Not a Security
In the SEC vs. Ripple case, Judge Torres released the much-anticipated preliminary judgment ruling last month. The federal judge decided in the order that Ripple’s previous sales of XRP to financial institutions constituted an offering of securities.
She discovered that Ripple’s programmatic sales on digital exchanges and other transfers do not constitute securities. Furthermore, the court concluded that XRP is not a security.
Judge Analisa Torres of the United States District Court for the Southern District of New York has reportedly set a hearing on additional matters that she did not decide on during the proceedings for judgment for the second quarter of 2024.
Following the ruling, the SEC indicated that it intended to appeal the decision. The regulatory body most recently legally filed approval for an interlocutory appeal.
The SEC requests that an appeal be filed. Notably, the SEC’s proposed interlocutory appeal aims to reconsider Judge Torres’ order on Ripple’s programmatic XRP exchange sales and other distribution, particularly XRP distribution to workers.
Surprisingly, the SEC is not attempting to overturn Judge Torres’ judgment, claiming that XRP is not a security.
“Specifically, the SEC wants to confirm the Court’s retaining that Defendants’ ‘Programmatic’ proposals and sales to XRP consumers over crypto asset trading systems, as well as Ripple’s ‘Other Distributions’ in exchange for products and services, did not include the proposal or sale of securities under [the Howey test],” according to the SEC filing.
The SEC stated in its petition that Ripple must reply by Aug. 16, 2023 (a week after the letter was sent), and planned to produce a public statement outlining the lawsuit on Aug. 18. If the judge approves the petition, Ripple would have two weeks to react, and the SEC would have another week to reply.
Furthermore, the SEC stated that Ripple had to submit a response on or before September 1, 2023 (two weeks following the submission of the agency’s opening brief). Furthermore, the SEC’s response is due seven days later, on September 8, 2023.
When the SEC’s attorneys persuaded Judge Jed Rakoff of the same court to disregard the verdict while considering Terraform Labs’ move to drop its own SEC litigation, he signaled that it would challenge the result in another proceeding. Rakoff later ignored the move to dismiss, thereby rejecting Torres’ finding on programmatic sales.
The SEC is Unable to Challenge XRP’s Non-security Category
It is worth noting that there has been some uncertainty over the SEC’s appeal petition. A few members of the cryptocurrency industry believe the SEC wants to challenge all elements of the lawsuit Ripple won, including Judge Torres’ conclusion that XRP is not a security.
Top XRP supporters, such as Blockchain Backer, have reached out to X to explain the SEC’s latest filing. The regulator, according to Blockchain Backer, will not contest the XRP non-security classification finding.
JUST IN: SEC DOES NOT APPEAL SECURITY STATUS OF DIGITAL ASSET “$XRP”
— Blockchain Backer (@BCBacker) August 9, 2023
XRP’S NON-SECURITY STATUS RULING AT SUMMARY JUDGEMENT REMAINS UNCHALLENGED
Ripple, the company, has its programmatic sales challenged https://t.co/I4giubBdno
In reply, Sherrie, a key XRP influencer, stated that “the SEC can not challenge XRP’s non-security status.”
How will the Decision Influence Ripple’s Dispute with the SEC?
The Securities and Exchange Commission (SEC) of the United States charged Ripple and its officials for generating more than $1.3 billion through an unlicensed asset sale of the XRP coin.
Whereas the judge decided that programmatic sales of XRP tokens are not securities, transactions of XRP tokens to institutional investors are indeed investment contracts. Ripple did violate US securities law in this instance, and it will have to continue battling for the $729 million it earned through signed contracts.
Closing Thoughts
The SEC has increased its enforcement proceedings against the blockchain and digital asset industries, charging platforms like Coinbase and Binance with breaching US securities law. According to the SEC, the bulk of cryptocurrency holdings are securities and hence subject to tight supervision. This is despite the recent ruling by Judge Torres that the sales of XRP shouldn’t be considered a security.
While defendants are waiting to use elements of Ripple’s judgment to their advantage, the SEC can use it to justify continuing its existing regulatory-by-enforcement policy.
