Overview of Ripple’s Legal Battle with the SEC
Ripple Labs has recently advanced its legal case against the U.S. Securities and Exchange Commission (SEC) by filing a Form C cross-appeal in the Second Circuit Court of Appeals. This action is part of the ongoing dispute over regulator classifications of digital assets.
Key Statements from Ripple’s Legal Team
- Ripple’s Chief Legal Officer, Stuart Alderoty, emphasized that “the SEC can’t submit new evidence or ask us to produce more.”
- The Form C appeals that Ripple has filed requests a de novo standard of review for every issue raised.
- This cross-appeal follows a previous filing by the SEC aimed at challenging a decision that had been partially in Ripple’s favor.
Today, Ripple filed a Form C – outlining the issues we wish to raise on our cross appeal. It’s important to note that this case does not aim to classify XRP solely as a security…
– Stuart Alderoty (@s_alderoty) October 25, 2024
Implications of the Appeal
Ripple’s Form C specifies the focus areas of the appeal, primarily contesting whether XRP’s institutional sales should be classified as registered securities, a matter that previously led to a $125 million fine imposed by the court.
Key Issues Raised in the Appeal
- Whether an “investment contract” must be a legally enforceable contract.
- The applicability of the Howey Test to determine if XRP transactions constitute investment contracts.
The SEC’s Position and Counterappeal
Ripple’s appeal coincides with the SEC’s recent filing questioning a prior ruling favoring Ripple. In an August 2023 decision, Judge Analisa Torres found that XRP was not classified as a security for sales made to the public, employees, and developers.
Financial Repercussions and Ongoing Investigations
However, the sales made to institutional clients were deemed securities, resulting in substantial financial penalties. The SEC is pursuing potential legal violations concerning Ripple executives, including CEO Brad Garlinghouse and co-founder Chris Larsen, regarding alleged unregistered securities offerings.
Conclusion
This legal conflict continues to shape the landscape of cryptocurrency regulation in the U.S. as Ripple seeks clarity in the classification of XRP and its sales practices.
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