SEC vs. Ripple lawsuit: SEC set to appeal judge’s ruling of XRP not being a Security

The Securities and Exchange Commission filed a letter to appeal regarding “Programmatic” offers and sales to XRP buyers.
The filing comes days after Judge Torres issued the summary judgment stating the public sale of XRP prevents it from obtaining the label of being a “security”.
Judge Torres, earlier in the day, also issued a Pretrial Scheduling Order for the second calendar quarter of 2024.

The Securities and Exchange Commission (SEC) has been relentless in its approach against Ripple over the past three years. The payments processor found some relief last month after obtaining a partial win from the presiding Judge Torres, while the SEC attempts to appeal the ruling.

SEC goes after Ripple again!

The SEC filed a letter outlining the basis of a Motion for Leave to File an Interlocutory Appeal on Wednesday. Put simply, the regulatory body will be pursuing to appeal the judgment of Judge Torres from July 14, where she ruled that XRP is not a security in the case of a public sale.

Ripple won the round partially, as only the sales on exchanges, on-demand liquidity services and other platforms were eligible for XRP to claim the status of not being a security. Institutional investors and over-the-counter sales still resulted in the Ripple token being labeled a security.

In its filing, the SEC stated,

“The rulings resulted in dismissal of claims involving more than half of Ripple’s XRP offers and sales and entirely disposed of the Section 5 primary liability claims against the Individual Defendants. All were based on undisputed facts. The rulings therefore involve controlling questions of law as to this case. (sic)”

Going forward, if the ruling was to be flipped, Ripple would lose its partial win too, which would most certainly undo the gains it achieved over the past month and lead to a major crash in XRP price.

Earlier in the day, Judge Torres also issued a Pretrial Scheduling Order that stated that “the Court will seek to schedule a jury trial for the second calendar quarter of 2024”. This would place the next trial at least eight months from now.

SEC vs Ripple Pretrial Scheduling Order

SEC vs Ripple lawsuit FAQs

Is XRP a security?

It depends on the transaction, according to a court ruling released on July 14:

For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.

How does the ruling affect Ripple in its legal battle against the SEC?

The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.

While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.

What are the implications of the ruling for the overall crypto industry?

The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.

Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.

Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.

Is the SEC stance toward crypto assets likely to change after the ruling?

The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.

While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.

Can the court ruling be overturned?

The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.

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