In a significant development for the cryptocurrency industry, a US judge has denied the Securities and Exchange Commission's (SEC) attempt to appeal a crucial ruling. The ruling asserts that digital tokens are not considered securities when sold to the general public, delivering another setback to the SEC's ongoing efforts to regulate the crypto space.
Federal judge Analisa Torres, presiding in the Southern District of New York, made her decision clear on a case involving Ripple Labs and its XRP token. She stated that there was no "substantial ground for difference of opinion" regarding her findings, reinforcing her earlier judgment.
This legal saga began when Torres ruled in July that XRP was deemed a security only when sold to institutional investors. Importantly, she affirmed that the sale of XRP on public exchanges to retail customers did not violate federal securities laws. This initial decision was celebrated within the cryptocurrency community.
In a notable response to the recent denial of the SEC's appeal, Daniel Stabile, a legal partner at Winston & Strawn, a law firm representing Ripple Labs and cryptocurrency exchange Binance in various legal matters, described the victory as "another example of a court halting the SEC's efforts of regulation by enforcement" against crypto firms.
As a result of this positive outcome, XRP (XRP-USD), the fifth largest cryptocurrency initially created and issued by Ripple Labs, experienced a 5% surge in value. However, it's worth noting that this decision not only impacts XRP but has broader implications for the cryptocurrency market.
On the day of the ruling, crypto stocks, including Coinbase Global (COIN), Microstrategy (MSTR), and Bitcoin mining companies like Marathon Digital (MARA) and Riot Platforms, Inc (RIOT), saw initial gains of 1-3% but later retreated by 11 am ET.
The SEC, led by Chair Gary Gensler, has consistently argued that specific cryptocurrencies should be classified as securities, thereby falling under the agency's regulatory purview. This stance has led to several lawsuits against major players in the crypto industry.
In August, the SEC faced another setback when a federal appeals court supported an asset manager's desire to launch the first bitcoin exchange-traded fund (ETF) against the SEC's objections. The court deemed the SEC's reasoning "arbitrary and capricious."
However, the SEC still has an opportunity to request a re-hearing for this case within two weeks. Despite these challenges, the SEC has achieved some victories, with a different federal judge, Jed Rakoff, ruling in July that digital currencies can be considered securities when sold to the general public, contrary to Torres' earlier ruling.
With Torres setting a trial date for the Ripple Labs case on April 23 of the following year, the SEC has the option to settle the case with Ripple before the trial or pursue another appeal after the trial concludes. This legal battle continues to shape the regulatory landscape for cryptocurrencies in the United States, making it a topic of keen interest for both the crypto community and the broader financial sector.