SEC Disputes Ripple Ruling, Hints at Possible Appeal
The U.S. Securities and Exchange Commission (SEC) has expressed its disagreement with a portion of the recent Ripple ruling, stating that it was "wrongly decided." The contested part of the ruling focused on whether the sale of XRP on exchanges constituted a sale of securities. The SEC's comments came in response to a motion to dismiss filed by defendants Terraform Labs and its founder, Do Kwon, who referred to the Ripple case ruling in their defense.
The Ripple ruling, which was seen as a partial win for the SEC and the U.S. crypto industry, found that the sale of XRP to institutional investors was considered a sale of securities. However, the SEC argued that the court should have reached a similar conclusion regarding retail sales of XRP. According to the SEC, the Ripple ruling created an "artificial distinction" between "sophisticated" institutional buyers and retail investors, leading to different "reasonable investor" standards for the two groups.
The SEC asserted that the court's analysis of retail sales conflicted with the well-established Howey Test and federal securities laws jurisprudence. The agency further claimed that the ruling's logic deviated from the fundamental principles behind Howey and the federal securities laws, as it provided less protection to retail investors, contrary to the intended purpose of these laws.
As a result, the SEC asked the court to disregard the Ripple ruling concerning retail sales in the ongoing lawsuit against Terraform Labs and Do Kwon.
Regarding the possibility of an appeal, the SEC's filing mentioned that its staff is considering all options for "further review" and intends to recommend the SEC to file an appeal. Ripple CEO Brad Garlinghouse previously stated that the SEC could take "years" to file an appeal, expressing optimism that Ripple would ultimately prevail if an appeal were filed.
The dispute over the Ripple ruling continues to draw attention, and the SEC's potential appeal adds another layer of uncertainty to the ongoing legal battle between Ripple and the regulatory agency.