The U.S. Securities and Exchange Commission (SEC) has intensified its legal battle, appealing a federal court's decision in its contentious case against Ripple Labs. The SEC argues that the New York District Court erred when it ruled that XRP sales to retail investors did not constitute an unregistered securities offering.
On January 15, the agency filed with the Second Circuit Appeals Court to reverse Judge Analisa Torres' July 2023 ruling, aiming for XRP sales to retail investors to be reclassified as unregistered securities.
The SEC also contends that XRP's distribution as employee compensation and in business transactions was incorrectly excluded from this classification.
This appeal continues the SEC's pursuit following a partial defeat in its ongoing lawsuit against Ripple initiated in December 2020. Judge Torres had previously determined that while XRP sales to institutional investors qualified as securities, sales to retail investors through exchanges did not, due to a lack of knowledge about the sellers among these retail investors.
The SEC insists that XRP buyers anticipated profits due to Ripple’s promotional activities, categorizing XRP as an investment contract under the Howey test—a standard argument the commission has used against multiple cryptocurrency firms.
Ripple's leadership remains critical of the SEC's actions. CEO Brad Garlinghouse, via a January 15 social media post, accused the SEC of rehashing failed arguments, suggesting these efforts would likely be shelved by the next administration. Ripple's chief legal officer Stuart Alderoty echoed these thoughts, foreseeing the SEC's appeal as an ineffective repetition.
Pro-crypto attorney Jeremy Hogan expressed skepticism about the SEC’s approach, suggesting the case might not reach a ruling. He criticized the SEC's brief, noting the lack of evidence showing retail investors were aware of Ripple’s intentions or "promises."
Ripple now has the chance to present its counter-arguments in writing, with the possibility of oral hearings before a court decision is reached. The appeals process is expected to be lengthy, extending over several months.
In parallel, Ripple has cross-appealed the SEC’s partial success in the New York lower court, contesting the order to pay a $125 million civil penalty for its losses.
Amidst these legal battles, XRP has experienced a 10% price increase in the past 24 hours, part of a broader rise in the cryptocurrency market.