The U.S. Securities and Exchange Commission (SEC) has filed a formal appeal against Ripple Labs with the U.S. Court of Appeals for the Second Circuit. The appeal comes after a district court ruling in August, which the SEC said contained significant legal errors.

SEC Challenges Ripple Labs Ruling in U.S. Court of Appeals

On October 2, 2024, the SEC filed a notice of appeal in its ongoing lawsuit against Ripple Labs, Inc. and its executives, Brad Garlinghouse and Chris Larsen. The SEC’s filing challenges a final judgment issued by the United States District Court for the Southern District of New York on August 7, 2024. The ruling marked a partial victory for Ripple Labs but was challenged by the SEC, which continues to assert that Ripple’s distribution of the XRP token violated federal securities laws.

In the appeal documents, SEC lawyers argued that the district court’s interpretation of key securities regulations was flawed. Specifically, the SEC argued that the court failed to properly apply the Howey Test, a standard used to determine whether a transaction qualifies as an investment contract. The commission’s lawyers believe that this misapplication undermines the SEC’s regulatory authority in cases involving cryptoassets.

Ripple Labs CEO Brad Garlinghouse responded to the appeal of X. “Somehow, they haven’t gotten the message: they lost on everything that matters,” Garlinghouse said. “Ripple, the crypto industry, and the law have prevailed. While we will fight in court for as long as it takes, let’s be clear: XRP’s non-security status is the law of the land today — and that hasn’t changed even with this outrageous — and misguided — appeal.”

Ripple Labs CEO added:

Remember, when the SEC unsuccessfully attempted to file a ‘provisional appeal’, they made it clear that they had no intention of challenging XRP’s non-security status.

The appeal, filed on behalf of the SEC, will take the case to the U.S. Court of Appeals for the Circuit Court of Appeals for further review. As the case progresses, both Ripple Labs and the SEC will continue their legal battle, which has broader implications for the classification of cryptocurrencies under U.S. securities law. Ripple’s chief legal officer, Stuart Alderoty, wrote that the SEC’s decision to appeal “is disappointing, but not surprising … This only prolongs the agency’s utter confusion,” he added.

What do you think about the SEC appealing Ripple’s decision? Share your thoughts and opinions on this topic in the comments section below.
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