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

The U.S. Securities and Exchange Commission (SEC) has filed a formal notice of appeal against Ripple Labs in the U.S. Court of Appeals for the Second Circuit.

The U.S. Securities and Exchange Commission (SEC) has filed a formal notice of appeal against Ripple Labs in the U.S. Court of Appeals for the Second Circuit. This follows a district court’s ruling in August, which the SEC argues contained significant legal errors.

The SEC’s Appeal in the Ripple Labs Case: A Deeper Dive

On Oct. 2, 2024, the SEC submitted its notice of appeal in the ongoing case against Ripple Labs, Inc. and its executives, Brad Garlinghouse and Chris Larsen. The SEC’s filing challenges the final judgment entered by the U.S. District Court for the Southern District of New York on Aug. 7, 2024. This judgment marked a partial victory for Ripple Labs but was contested by the SEC, which continues to assert that Ripple’s distribution of XRP tokens violated federal securities laws.

The SEC’s legal team argues that the district court’s interpretation of key securities regulations was flawed. Specifically, the SEC contends that the court failed to apply the Howey Test properly, a standard used to determine whether a transaction qualifies as an investment contract. This misapplication, according to the commission's attorneys, undermines the SEC's regulatory authority in cases involving cryptocurrency assets.

Ripple Labs’ CEO Brad Garlinghouse responded to the appeal filing on X. “Somehow, they still haven’t gotten the message: they lost on everything that matters,” Garlinghouse stated. “Ripple, the crypto industry, and the rule of law have already prevailed. 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 – and that does not change even in the face of this misguided – and infuriating – appeal.”

The Ripple Labs executive added:

Remember, when the SEC tried unsuccessfully to file an ‘interlocutory appeal’ they made clear they had no intention of challenging XRP’s status as a non-security.

The appeal, filed on behalf of the SEC, will bring the case before the U.S. 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 in U.S. securities law. Ripple Chief Legal Officer Stuart Alderoty wrote that the SEC’s decision to appeal “is disappointing, but not surprising … This just prolongs what’s already a complete embarrassment for the agency,” he added.

What are your thoughts on the SEC appealing the Ripple decision? Share your thoughts and opinions on this subject in the comments section below.

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