Ripple hits back at SEC, files cross-appeal

The dispute continues: Ripple Labs announced plans to file a cross-appeal in its ongoing legal case with the U.S. Securities and Exchange Commission.

Ripple’s move aims to preserve its legal defense while the SEC’s own appeal continues through the courts. The SEC filed an appeal on October 2 against a July 2023 decision that concluded XRP could not be classified as a security.

The SEC’s objection follows a ruling that ruled that Ripple’s sale of XRP on exchanges did not violate federal securities laws.

Ripple CEO Brad Garlinghouse tweeted in a cross-appeal that Ripple “looks forward to determining the fate of the SEC and finally putting an end to the SEC’s regulatory agenda through enforcement.”

As I said earlier this month, if Gensler and the SEC cared about the rule of law, they would have accepted their losses and moved on. But they are not interested in faithfully enforcing the law or providing clarity to industry players in the US. Under Mayor Gensler, the agency is only… https://t.co/hFlkXw83s8

— Brad Garlinghouse (@bgarlinghouse) October 10, 2024

The SEC filed a lawsuit against Ripple in December 2020, claiming that Ripple’s cryptocurrency XRP was sold as an unregistered security. Securities are financial instruments, such as stocks or bonds, that must meet strict regulatory requirements before they can be sold. In this case, the real issue is whether XRP qualifies as a security.

Ripple’s cross-appeal allows it to address all aspects of the case while the legal process continues. According to Ripple’s Chief Legal Officer Stuart Alderoty, the company wants to keep all options open.

This was despite the SEC’s controversial stance on what constitutes a token as a security and the clear details of the SEC’s objection.

The SEC lost on all the important points; so they appealed. Today, Ripple filed a cross-appeal to ensure nothing is left on the table, including the argument that it cannot be an “investment contract” without the fundamental rights and obligations found in a contract.

— Stuart Alderoty (@s_alderoty) October 10, 2024

In appellate cases like this, both sides file briefs explaining the basis of their arguments, followed by more detailed legal summaries. Ripple’s next step will be to send out these summaries as the appeal progresses. Both Ripple and the SEC will announce their positions in the coming weeks.

ongoing war

As mentioned before, Ripple Labs was sued by the SEC in 2020 for unregistered securities offering by selling XRP. The SEC alleged that XRP was a security under US law and alleged that Ripple and its executives raised $1.3 billion in capital without proper registration.

Ripple argued that XRP did not meet the criteria for a security under the Howey Test.

Throughout the case, Ripple reached many major milestones, such as a landmark decision by Judge Sarah Netburn in March 2021 that distinguished XRP from Bitcoin (BTC) and Ethereum (ETH), recognizing its usefulness and currency-like value.

The court also ordered the release of key documents, including internal communications from former SEC director William Hinman, whose comments on Ethereum’s non-security status influenced the case.

On July 13, 2023, Judge Analisa Torres ruled that XRP is not a security when sold on public exchanges, marking a significant victory for Ripple and the broader crypto industry.

However, the court ruled that Ripple’s sale of XRP to institutional investors violated securities law. Ripple’s legal struggles continued, including the SEC’s attempt to appeal this decision, which was rejected in October 2023.

Ultimately, Ripple faced a fine of $125 million. However, the decision was a turning point in the field of crypto regulation and set a precedent for how digital assets are classified in the US.