- Pro-crypto lawyer James Murphy analyzed the SEC’s plan to appeal the XRP ruling and listed four likely paths that the regulator can take.
- The Securities and Exchange Commission could consider going through a trial against Ripple executives Chris Larsen and Brad Garlinghouse.
- The lawyer explains how there is pressure on the regulator to file an interlocutory appeal as the ruling weighs heavily on SEC lawsuits against Binance and Coinbase.
Pro-crypto lawyer, James Murphy, evaluated the Securities and Exchange Commission (SEC) vs Ripple lawsuit and the likely options that the regulator can exercise in appealing Judge Analisa Torres’ ruling. Murphy explains the four options facing the Securities and Exchange Commission and their impact on the XRP holder community.
Also read: Pro-XRP John Deaton argues SEC vs Ripple ruling is sound, cites Celsius bankruptcy example
SEC vs Ripple appeal: Four options facing the regulator
Lawyer John Murphy laid out the four options that the US financial regulator can exercise in the SEC vs Ripple ruling.
The first option is filing for an interlocutory appeal. This means Judge Analisa Torres’ ruling in the SEC vs Ripple lawsuit will be appealed during the course of the litigation.
No final judgment has been entered yet, therefore, the SEC needs permission from the ruling Judge Torres and the Second Circuit Court of Appeals to proceed in this case. Three key requisites on which such an appeal will be granted are:
- The ruling involves a controlling question of law.
- There is substantial ground for difference of opinion on that question.
- An immediate appeal may materially advance the litigation.
If these three conditions are met, the SEC will have the requisite permission to appeal the ruling and attempt to change the outcome of the lawsuit. Ideally, this process needs to be completed within a 30-day timeframe.
The second option facing the regulator is to go to trial against Ripple executives Chris Larsen and Brad Garlinghouse and file a regular appeal. Third, the SEC could drop the claim against Ripple executives and take an immediate appeal – no permission needed – or resort to the final and fourth option of settlement.
In Murphy’s experience, a settlement is unlikely and the regulator is likely to resort to option one.
SEC’s next steps could directly influence Coinbase and Binance lawsuits
The pro-crypto lawyer explains that there is tremendous political pressure on Gensler to get the Torres decision reversed as looms over the regulator’s cases against two large cryptocurrency exchanges, Coinbase and Binance.
As exchanges worldwide went on an XRP re-listing spree, it shifted attention to the ruling and the SEC’s next steps. Murphy argues that a settlement is unlikely at this point and an interlocutory appeal is likely within the next two weeks.
SEC v. @Ripple update.
— MetaLawMan (@MetaLawMan) July 25, 2023
There's a lot of debate about what the SEC will do next in the Ripple case.
I believe there are at least 4 options under consideration...
The lawyer believes that the SEC’s actions would be in the interest of the XRP Community and he likes the payment firm’s chances on appeal.
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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