Last year the US District Court for the Southern District of New York ruled in favor of Ripple Labs that the SEC had not made its case that Ripple had violated securities law when selling the XRP coin on public exchanges to retail customers
The court also ruled that Ripple violated securities law through its institutional sales of XRP, but the SEC attempt to file an interlocutory appeal against the motion for summary judgment was denied by the judge
“XRP’s status as a non-security is the law of the land today – and that does not change even in the face of this misguided, and infuriating, appeal.”
Brad Garlinghouse, CEO of Ripple
The SEC filed a Notice of Appeal last Wednesday to the Second Circuit Court of Appeals. This was after Judge Analisa Torres made her final judgment in the federal regulator’s case against Ripple in August 2024. She imposed a a $125m fine against Ripple, well below the $2 billion requested by the SEC in disgorgement, prejudgment interest and civil penalties.
The fine enforcement was stayed by Torres until after the SEC’s deadline to file an appeal had elapsed or was resolved by the circuit court.
This lawsuit, which began in December 2020, has become a defining case for the entire cryptocurrency industry. Its outcome could set a significant precedent for how digital assets are regulated in the United States.
In a statement, the SEC spokesperson said: “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.”
“Another setback for the SEC will, I suspect, further lift investor confidence in cryptocurrencies.”
Harley Thomas, Martin Kenney & Co
CEO Brad Garlinghouse and Chief Legal Officer Stuart Alderoty of Ripple both commented on X.
Alderoty tweeted: “The SEC’s decision to appeal is disappointing, but not surprising. This just prolongs what’s already a complete embarrassment for the agency. The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course, there were no victims or losses.”
Garlinghouse tweeted: “Ripple, the crypto industry, and the rule of law have already prevailed. While we’ll fight in court for as long as we need, let’s be clear: XRP’s status as a non-security is the law of the land today – and that does not change even in the face of this misguided, and infuriating, appeal.”
We spoke to Harley Thomas, forensic accountant and senior investigator at Martin Kenney & Co (MKS) and author of A landmark lawsuit is sending ‘ripples’ through the world of cryptocurrency.
“I’m slightly surprised at the further twist in this saga, given that it appeared the SEC was not intending to appeal,” he said. “And it’s certainly had a negative impact on the price of XRP, which dropped approximately 18% following the news.
“But it seems that the SEC isn’t ready to accept the likely possibility of defeat if it follows this route.
“I’ll be watching like many to see how this appeal process unfolds; another setback for the SEC will, I suspect, further lift investor confidence in cryptocurrencies.”
GRIP Comment
If the Second Circuit Court of Appeals rules in favor of the SEC, it could have significant implications for the cryptocurrency market. The SEC could argue that other digital assets sold on public exchanges to retail customers are also securities and subject to regulation. This could lead to increased regulatory scrutiny and potentially deter investment in cryptocurrencies.
On the other hand, a victory for Ripple could provide more clarity and certainty for the cryptocurrency market. It could also encourage more investment in digital assets.
It’s important to note that the outcome of the appeal is uncertain. Both sides have strong arguments, and the Second Circuit could rule in favor of either party.
