SEC starts the procedure of appealing the court’s decision on the lawsuit against Ripple

What’s new? The US Securities and Exchange Commission (SEC) has begun the process of appealing the court’s decision on its lawsuit against fintech company Ripple regarding the status of the XRP token it issues. Thus, officials have filed a Form C, or preliminary application for a civil appeal, with the court.

Material by The Block

What else is known? In 2020, the SEC accused Ripple of raising $1,3 billion through the sale of XRP, which, in its view, is an unregistered security. In 2023, the court ruled that retail sales of XRP through exchanges were not a violation, but direct sales of the asset to institutional investors are securities.

The ruling was handed down by Judge Analisa Torres of the US District Court for the Southern District of New York.

The SEC demanded $2 billion in fines for the violations partially recognized by the court, but Ripple managed to challenge the amount, and it was reduced to $125 million.

Last year, while still in litigation, the SEC unsuccessfully tried to file a first appeal. It was dismissed by the court because it did not materially affect the timing of the end of the proceedings.

In the new appeal, the SEC said the court may have erred, including in the case against Ripple executives Brad Garlinghouse and Chris Larsen. Notably, the regulator itself withdrew a separate civil suit against the senior executives in October 2023.

Also in their appeal, the officials seek review of the trial court’s findings in the appellate court. In their view, Judge Torres may have erroneously granted summary judgment in favor of Ripple regarding the sale of XRP through exchanges, as well as sales of the asset directly by Garlinghouse and Larsen.

“We believe that the district court decision in the Ripple matter conflicts with decades of Supreme Court precedent and securities laws and look forward to making our case to the Second Circuit,” an SEC spokesperson said.

Ripple’s Chief Legal Officer Stuart Alderoty said the company has filed a counter, similar document. In his opinion, the court’s ruling that XRP is not a security is not subject to appeal and was issued legally.

Earlier this month, the SEC itself was sued by Bitnomial because of its stance on XRP. The crypto derivatives exchange accused the regulator of preventing it from launching XRP futures by calling the product a security, contradicting a court ruling in the SE’s lawsuit against Ripple. Bitnomial is seeking an injunction to stop the SEC from regulating XRP futures and prosecuting the exchange for launching such products.

Also, this month, two asset management firms, Bitwise and Canary Capital, have already filed applications with the SEC to launch XRP-based spot exchange-traded funds (ETFs). Earlier, the regulator allowed similar products based on bitcoin and Ethereum into the market, recognizing that these assets do not belong to the category of securities.

Investment firm Grayscale later applied to the SEC for authorization to convert its Digital Large Cap Fund into an exchange-traded fund. The product basket includes XRP, among others.