SEC Appeals Court Ruling On XRP, CEO Brad Garlinghouse Slams Decision as “Misguided”

In a significant move that could reshape the regulatory landscape for XRP and blockchain payments company Ripple, the US Securities and Exchange Commission (SEC) announced on Wednesday that it is appealing the court ruling limiting its authority over crypto markets.

The US Securities and Exchange Commission (SEC) announced on Wednesday that it is appealing a court ruling that limits its authority over crypto markets.

The appeal targets a July 2023 decision by US District Judge Analisa Torres, which found that the XRP token, sold by Ripple Labs on public exchanges, does not qualify as a security under existing laws.

The SEC is arguing that the judge erred in her interpretation of the Howey Test, which is used to determine whether an asset is considered a security. The SEC maintains that XRP meets the criteria of an investment contract and should therefore be subject to securities laws.

If the 2nd US Circuit Court of Appeals upholds Judge Torres's ruling, it could significantly hamper the SEC’s ability to regulate other cryptocurrency exchanges, such as Coinbase, and would also complicate the agency’s oversight of new financial products that don't fit traditional definitions.

However, the ruling was not entirely favorable for Ripple. Torres also ruled that roughly $728 million of XRP sales to institutional investors should be classified as securities, a decision that Ripple is also appealing.

The SEC had originally sought a hefty $2 billion fine against Ripple, but Torres ultimately imposed a $125 million penalty, which is currently on hold pending the outcome of the appeal.

Ripple CEO Brad Garlinghouse expressed his frustration at the SEC’s decision to appeal, calling it “misguided” and “infuriating.” He maintained that despite the ongoing legal challenges, the current legal status of XRP as a non-security is established.

“If Gensler and the SEC were rational, they would have moved on from this case long ago,” Garlinghouse said in a statement. “It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC.”

“While we’ll fight in court for as long as we need, let’s be clear: XRP’s status as a non-security is the law of the land today,” he added.

At the time of writing, XRP is trading at $0.5390, down 10% after the SEC appealed the judge’s ruling on Wednesday.

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