SEC Urges Appellate Court Review of XRP Ruling

On Friday, the U.S. Securities and Exchange Commission (SEC) sought authorization to challenge a federal judge's decision that the sales of XRP through exchanges did not contravene securities laws. This request came one day after the judge granted permission for the SEC to present its case.

The SEC swiftly moved to petition Judge Analisa Torres, presiding over the U.S. District Court for the Southern District of New York, for the certification of an interlocutory appeal. This strategic move occurred just a day after the judge granted permission for such an appeal to be pursued. The focal point of the federal regulator's appeal centers around the judge's prior ruling. This ruling stated that Ripple's programmatic sales of XRP didn't transgress securities regulations. The rationale behind this ruling was that the expectations of retail investors purchasing XRP on an exchange diverge from those of institutional investors procuring XRP directly from Ripple. The SEC's action aims to challenge this perspective.

"The rulings that the SEC seeks to appeal were legal determinations about the existence of investment contracts based on undisputed facts. The undisputed facts (e.g., Order at 23 (Programmatic Sales are 'blind bid/ask transactions')) present a legal question – can an issuer’s offers and sales on crypto asset trading platforms create a reasonable expectation of profits based on the efforts of others? This legal question is at issue in a number of pending cases, and a Second Circuit ruling will have 'precedential value,'" the filing said.

The regulator noted that the ruling could have implications for other SEC cases, citing ongoing litigations involving Coinbase and Dragonchain, along with other legal proceedings such as bankruptcy cases.

In its submission, the SEC emphasized its stance on the sales of XRP, rather than the nature of the asset itself.

"The SEC did not argue here or in Terraform that the asset underlying those investment contracts were necessarily a security (and the SEC does not seek appellate review of any holding relating to the fact that the underlying assets here are nothing but computer code with no inherent value)," the filing said.

Ripple is granted time until September 1, 2023 to submit a reply to the SEC's motion. Following this, the regulatory body will possess an additional week to respond to Ripple's submission. If the SEC successfully obtains Judge Torres' authorization for an interlocutory appeal, the next step will involve the SEC petitioning the Second Circuit Court of Appeals to consider the case.