The feud continues: Ripple Labs has announced plans to file a cross-appeal in its ongoing legal case with the U.S. Securities and Exchange Commission.
This move by Ripple is meant to preserve its legal defenses as the SEC’s own appeal proceeds through the courts. The SEC filed an appeal on Oct. 2 to counter the July 2023 ruling that concluded XRP cannot be classified as a security.
The SEC’s appeal follows the ruling that determined Ripple’s sale of XRP on exchanges did not violate federal securities laws.
Ripple CEO Brad Garlinghouse tweeted that, with the cross-appeal, Ripple is “looking forward to sealing the SEC’s fate and finally putting an end to the SEC’s regulation-by-enforcement agenda.”
As I said earlier this month, if Gensler and the SEC cared about the rule of law, they would accept their loss and move on. But they are not interested in faithfully applying the law or in providing clarity to industry players in the US. Under Chair Gensler, the agency is only… https://t.co/hFlkXw83s8
— Brad Garlinghouse (@bgarlinghouse) October 10, 2024
The SEC sued Ripple in December 2020, claiming that XRP, Ripple’s cryptocurrency, was sold as an unregistered security. Securities are financial instruments, like stocks or bonds, that must meet strict regulatory requirements before being sold. The key issue in the case is whether XRP qualifies as a security.
Ripple’s cross-appeal ensures it can address all aspects of the case as the legal process continues. According to Ripple’s Chief Legal Officer Stuart Alderoty, the company wants to keep all options open.
This comes despite the SEC’s contentious stance on what constitutes a token as a security — and despite clear details of the SEC’s appeal.
The SEC lost on all key points—that’s why they appealed. Today, Ripple filed a cross-appeal to ensure nothing’s left on the table, including the argument that there can’t be an "investment contract" without there being essential rights and obligations found in a contract.
— Stuart Alderoty (@s_alderoty) October 10, 2024
In appeal cases like this, both parties file notices explaining the basis of their arguments, followed by more detailed legal briefs. Ripple’s next step is to submit these briefs as the appeal progresses. Both Ripple and the SEC will be outlining their positions in the coming weeks.
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The ongoing battle
As mentioned earlier, Ripple Labs was sued in 2020 by the SEC for conducting an unregistered securities offering by selling XRP. The SEC claimed that XRP was a security under U.S. law and alleged that Ripple and its executives raised $1.3 billion in capital without proper registration.
Ripple argued that XRP does not meet the criteria for a security under the Howey Test.
Throughout the case, Ripple achieved several important milestones, such as a key ruling by Judge Sarah Netburn in March 2021, which distinguished XRP from Bitcoin (BTC) and Ethereum (ETH), acknowledging its utility and currency-like value.
The court also ordered the release of crucial documents, including internal communications from former SEC director William Hinman, whose comments on Ethereum’s status as a non-security influenced the case.
On July 13, 2023, Judge Analisa Torres ruled that XRP is not a security when sold on exchanges to the public, marking a significant victory for Ripple and the broader crypto industry.
However, the court ruled that Ripple’s XRP sales to institutional investors violated securities law. Ripple’s legal struggles continued, including the SEC’s attempt to appeal this decision, which was denied in October 2023.
Ultimately, Ripple faced a $125 million fine. However, the ruling marked a turning point in the crypto regulatory landscape, setting a precedent for how digital assets are classified in the U.S. moving forward.
