SEC Files Notice of Appeal Against Ripple

The US Securities and Exchange Commission (SEC) has filed a notice of appeal with the Second Circuit Court of Appeals in its lawsuit against Ripple Labs, seeking to overturn Judge Analisa Torres' ruling from July 2023.

An SEC spokesperson said:

“We believe that the district court decision in the Ripple matter conflicts with decades of Supreme Court precedent and securities laws and look forward to making our case to the Second Circuit."

In that decision, the judge determined that while Ripple's institutional sales of XRP violated federal securities laws, its retail sales on exchanges did not.

An earlier attempt by the SEC to file an interlocutory appeal was denied.

Legal experts had anticipated this appeal, given the significance of Judge Torres' ruling, which found that XRP, in itself, was not a security under the SEC's Howey test.

This landmark decision established that secondary sales of XRP did not constitute unregistered securities transactions.

However, the court also ruled that early sales by Ripple’s founders to institutional investors did meet the criteria for securities, based on the nature of those transactions.

Judge Torres' decision was seen as a major win for Ripple and the wider cryptocurrency industry, as it challenged the SEC's broader approach to classifying digital assets.

Although Ripple was fined $125 million in August for institutional XRP sales—far below the $2 billion initially sought by the SEC in penalties—the enforcement of that fine has been stayed pending the appeal.

The SEC's move now extends the legal battle, with the Second Circuit set to review the lower court's ruling.

The outcome could have far-reaching implications for the regulation of digital assets and securities in the US.

Ripple Responds to SEC's Notice of Appeal

Ripple CEO Brad Garlinghouse recently shared his perspective on the SEC's notice of appeal via X (formerly Twitter).

Ripple's Chief Legal Officer, Stuart Alderoty, described the move as "disappointing, but not surprising."

In an August interview, Alderoty expressed confidence that the SEC would face significant challenges in convincing an appeals court to overturn the district court's ruling.

He said at that time:

"Even if they do appeal, I would just tell everyone 'take a deep breath.'"

Although the SEC has submitted its notice of appeal, the formal appeal itself has yet to be filed.