In simpler terms, the U.S. Securities and Exchange Commission (SEC) has officially challenged a decision made in 2023, which concluded that transactions involving Ripple‘s XRP token on cryptocurrency platforms did not infringe upon securities regulations.
As per the regulatory body’s standpoint, District Court Judge Analisa Torres made an error both factually and legally when she decided that the sale and offering of XRP to the public through crypto trading platforms, as well as the company’s distribution of the token for employee compensation and business transactions, did not fall under the category of investment contracts.
Details of the Appeal
As an analyst, I’m reporting that on January 15th, a petition was submitted by the Securities and Exchange Commission (SEC) to the U.S. Court of Appeals for the Second Circuit. The aim of this petition is to overturn Judge Torres’ decision and grant the SEC a summary judgment in their favor. This ruling would concern Ripple’s transactions, specifically the offers and sales of XRP to retail investors, as well as instances where XRP was exchanged for non-cash considerations.
This ongoing legal dispute traces back to 2020 when the regulatory body filed a lawsuit against Ripple, alleging that the cryptocurrency firm had sold XRP worth at least $1.3 billion without registering it as a security. After three years, Judge Torres delivered his verdict on this matter, deciding that institutional sales of the token were indeed in violation of U.S. securities laws, but automated ones were exempt due to their automated bidding system.
In October of last year, the regulatory body lodged an appeal against the court’s judgment. This recent action signifies a further, official progression in the case proceedings. The organization is clarifying their grounds for contesting the ruling handed down by the district court.
Once more, they reinforced their stance by applying the Howey Test, implying that purchasers of XRP believed they could earn profits due to Ripple’s marketing efforts for the token, thereby categorizing it as an investment agreement.
As a crypto investor, I’ve come to understand that the potential profit from an investment isn’t solely based on who is offering it, but rather on their actions and statements. This means that even when purchasing XRP from exchanges, the expectation of gain persists, despite Judge Torres’ ruling to the contrary.
Ripple Executives React
Following the submission, Ripple’s lead attorney, Stuart Alderoty, criticized the SEC’s action on social media, labeling it as “a repetition of arguments previously proven unsuccessful.” The lawyer also hinted that Ripple would present a counterargument in due course. Yet, he exhibited confidence that the upcoming Trump administration might discontinue the lawsuit.
Currently, remember that the SEC’s lawsuit is merely creating a commotion. However, a progressive regulatory era that supports innovation is imminent, and Ripple continues to flourish, according to his remarks.
In response, CEO Brad Garlinghouse labeled the filing as “unreasonable.” He criticized the agency for persistently doing the same actions yet hoping for different outcomes. Furthermore, the executive leveled accusations at Chair Gary Gensler, who is about to leave office soon, for taking the issue too personally.
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2025-01-16 17:25