SEC’s Ripple Appeal Targets Sales, Not XRP Non-Security Status

The U.S. Securities and Exchange Commission (SEC) has filed an appeal in its ongoing legal battle against Ripple Labs. The appeal challenges aspects of the court’s previous sales ruling but notably leaves XRP’s non-security status untouched.

This marks yet another chapter in the high-profile case, with the SEC focusing its appeal on Ripple’s sales practices and the involvement of its executives rather than the overall classification of XRP as a non-security.

SEC Appeal: Ripple Sales and Executive Involvement, A Disaster?

In July 2023, U.S. District Judge Analisa Torres ruled in favor of Ripple, determining that sales of XRP to retail investors on digital asset platforms were not securities transactions under U.S. law.

However, the court found that Ripple’s institutional sales of XRP did breach securities regulations, resulting in a $125 million penalty against Ripple for unregistered securities offerings.

The SEC’s appeal, filed on October 17, 2024, does not contest the ruling regarding XRP’s retail sales, which remains intact.

Instead, the SEC targets specific aspects of Ripple’s operations, focusing on programmatic sales of XRP on digital platforms, sales by Ripple’s executives, Brad Garlinghouse and Chris Larsen, and distributions of XRP in exchange for services rather than cash.

According to the appeal filing, the SEC seeks to review these “de novo” issues, meaning the appellate court will examine the legal questions from scratch without deference to the trial court’s judgment.

The SEC believes that the district court “erroneously” ruled in favor of Ripple on these points and wants the U.S. Court of Appeals for the Second Circuit to reconsider the matter.

Ripple’s Chief Legal Officer, Stuart Alderoty, responded swiftly to the SEC’s filing, emphasizing that the key ruling affirming that XRP is not a security remains unchallenged.

Implications for Ripple and the Crypto Industry

The SEC’s appeal extends the legal dispute many hoped had concluded with Judge Torres’s July ruling.

If the SEC prevails in its appeal, Ripple could face additional penalties or operational restrictions on its sales and distribution practices.

The SEC also aims to reinstate the aiding and abetting charges against Ripple’s top executives, Garlinghouse and Larsen, which were initially dropped.

However, despite the ongoing legal wrangling, the crypto community focuses more on the case’s positive aspects.

Ripple’s partial victory in 2023 has already cleared the way for major cryptocurrency exchanges to relist XRP, which had previously been delisted during the earlier stages of the lawsuit.

Since then, XRP has regained momentum in the market, with many investors and industry commentators, including crypto pundit Ben Armstrong (also known as BitBoy), expressing confidence in the token’s future performance.

Armstrong recently noted that XRP would “still moon,” regardless of the SEC’s ongoing actions.

Additionally, the SEC’s use of the term “crypto asset” rather than “crypto asset security” in its latest filing further signals that the regulatory body no longer pursues XRP’s classification as a security, a central issue when the lawsuit began four years ago.

The outcome of the SEC’s appeal, which could extend the case until 2026, will determine whether Ripple faces any additional legal consequences for its sales practices.

Ripple is also preparing its own cross-appeal, which could challenge the $125 million fine related to its institutional sales and potentially alter the scope of the penalties it faces.

In the meantime, as Alderoty announced, Ripple will file Form C for a cross-appeal next week.

“Stay tuned for Ripple’s Form C to be filed next week.”

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