- SEC reignited legal tensions with Ripple Labs over XRP’s classification
- XRP surges by 9.21%, reflecting resilience despite ongoing regulatory scrutiny by the SEC
The legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has taken a new turn, after the SEC formally appealed a pivotal ruling from July 2023.
The initial decision by Judge Analisa Torres differentiated XRP sales, determining that transactions on exchanges were not securities. And yet, sales to institutional investors were classified as such.
Despite Ripple being ordered to pay a $125 million civil penalty for institutional XRP sales, the SEC is now contesting the court’s position on secondary market transactions.
By invoking the Howey Test, the agency argues that Ripple’s promotional activities fostered profit expectations among investors. According to the SEC, this positions XRP as an investment contract.
What’s the reason behind the appeal?
The SEC argued that “investor expectations hinge on the issuer’s actions, not the identity of the seller,” emphasizing that Ripple’s distribution of XRP, even in non-cash transactions like employee compensation and business incentives, aligns with the “investment of money” requirement under the Howey framework.
The timing here is interesting. Especially since changes in the SEC’s leadership are expected soon. And yet, the regulator has remained firm, refusing to delay its pursuit of this case, as confirmed by Ripple’s Chief Legal Officer Stuart Alderoty.
Ripple Labs criticizes SEC
As expected, Ripple’s leadership has not held back in criticizing the SEC’s decision to pursue an appeal against its recent legal setback.
Just recently, Alderoty labeled the move as a “waste of taxpayer money,” reflecting the firm’s growing frustration with the regulator’s relentless enforcement actions.
He said,
“On January 20, Gensler’s war on crypto ends at the SEC. We asked the SEC to agree to postpone the filing of their opening brief in their appeal of our victory (current deadline Jan 15) – and they refused. What a waste of time and taxpayer dollars!”
Will Trump help cool down the SEC vs Ripple legal war?
All of this coincided with top Republican officials at the SEC preparing to revamp the agency’s approach to cryptocurrency regulations, potentially marking a significant shift in policy.
According to sources, commissioners Hester Peirce and Mark Uyeda are exploring steps to introduce clearer guidelines on when cryptocurrencies are classified as securities. Additionally, they are considering a review of ongoing crypto enforcement cases.
With Paul Atkins poised to take over as chair under President Donald Trump, there is growing anticipation that the stringent regulatory stance led by Gary Gensler may soon ease.
Nonetheless, Atkins’ confirmation by the Senate remains a key factor in determining the timeline for these changes.
XRP’s price action
Despite the SEC’s sustained efforts to challenge previous rulings, XRP’s market performance remains resilient. As per CoinMarketCap, XRP was trading at $3.08 at press time, reflecting a 9.21% hike over the last 24 hours.
In fact, a price hike occurred even when the agency filed a ‘Civil Appeal Pre-Argument Statement’ on 17 October – A sign of its determination to advance its legal battle.
While the token faced some short-term fluctuations amid these developments, the broader market sentiment around XRP has remained optimistic.
