The US Securities and Exchange Commission (SEC) has officially appealed a court decision in its long-running case against web3 payments company, Ripple Labs Inc.
This move follows a ruling by Judge Analisa Torres, who decided that Ripple violated securities laws in some cases but not in others.
As this appeal moves forward, the status of Ripple’s cryptocurrency, $XRP, remains uncertain.
Investors and the wider crypto industry are left waiting to see how this will affect $XRP’s future.
Ripple court ruling explained
In July 2023, Judge Torres ruled that Ripple broke US securities laws through its institutional sales of $XRP, meaning its sales to large investors.
However, she also ruled that Ripple’s programmatic sales—those made on public retail exchanges—did not violate these laws.
This was a partial victory for Ripple, as the SEC had been arguing that all $XRP sales should be classified as illegal securities sales.
Earlier in the case, the SEC had tried to file a mid-case appeal, known as an interlocutory appeal, but Judge Torres rejected it.
In August 2023, she ordered Ripple to pay a $125 million fine for the institutional sales, far less than the $1.9 billion the SEC had originally asked for. The judge delayed the payment of this fine until the appeal process is complete.
In a statement, 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”.
The SEC is hoping the Court of Appeals will overturn parts of the previous ruling, particularly around the programmatic sales of $XRP.
Ripple has responded strongly to the SEC’s decision to appeal. It’s CEO, Brad Garlinghouse, took to social media to express his frustration, saying, “[The SEC] lost on everything that matters … XRP’s status as a non-security is the law of the land today”.
Ripple’s Chief Legal Officer, Stuart Alderoty, also expressed disappointment but said the appeal was “not surprising”.
Impact on XRP and the ETF approval
The SEC’s appeal is likely to have a wider impact, especially on financial products related to $XRP.
Just hours before the SEC filed its notice of appeal, Bitwise, a major asset management firm, applied to launch an exchange-traded fund (ETF) based on $XRP.
An ETF allows both institutional and retail investors to invest in the cryptocurrency through a regulated financial product. However, due to the ongoing legal battle between Ripple and the SEC, the chances of this ETF being approved are now slim.
Bitwise’s application, which was initially filed in Delaware, will eventually need approval from the SEC. Given the new appeal, experts believe this approval could be delayed indefinitely.
The Head of Research at Galaxy Digital, Alex Thorn, had previously said that an SEC appeal would reduce the likelihood of an XRP ETF to “near zero”.
Ripple’s legal battle with the SEC has become one of the most significant cases in the cryptocurrency industry. The final ruling in July 2023 was seen as a major win for Ripple, but the SEC’s decision to appeal puts that victory on hold.
With the case now heading to the US Court of Appeals for the Second Circuit, the uncertainty surrounding $XRP’s legal status will likely continue for some time.
This ongoing legal uncertainty is not just a problem for Ripple but also for investors and financial firms looking to create products based on $XRP, such as the Bitwise ETF.
Until the court case is fully resolved, it’s unlikely that the ETF or other financial products related to $XRP will move forward.
All in all, the SEC’s appeal has added yet another layer of complexity to the Ripple case, extending the uncertainty for $XRP and the broader cryptocurrency market.
