The United States Securities and Exchange Commission (SEC) has officially filed its opening brief in the ongoing legal battle with Ripple Labs over the status of the company’s digital asset, XRP.
Ripple & SEC Legal Battles
In a recent filing to the Second Circuit Appeals Court, the SEC contended that the New York District Court erred in its ruling that XRP sold to retail investors did not constitute an unregistered securities offering. The commission argues that the court misapplied key legal principles and failed to fully recognize how XRP functions as a security in the context of Ripple’s broader business operations.
The agency requested that the appeals court reverse Judge Analisa Torres’ July 2023 ruling classifying XRP sales to retail investors as unregistered securities and issue a revised judgment against Ripple if the decision is overturned. Additionally, the SEC argued that XRP was distributed as employee compensation and improperly excluded from being deemed a security in business transactions.
The SEC’s most recent filing advances the appeal it initiated in October. This appeal follows the agency’s partial loss in its ongoing lawsuit against Ripple, first filed in December 2020. Judge Torres ruled that XRP was considered a security when sold to institutional investors but not to retail investors on exchanges, as the buyers were unaware of the seller’s identity.
In its appeal, the SEC contended that XRP buyers, including retail investors, likely anticipated a profit due to Ripple’s promotional activities surrounding the token. The agency argued that Ripple’s efforts transformed XRP into an investment contract, as defined by the Howey test for securities—an argument the SEC has employed in cases against several other crypto companies.
Ripple CEO Brad Garlinghouse shared on X that the SEC was repeating the same thing repeatedly and expecting different results. He further noted that the practice is a definition of insanity.
Ripple’s legal chief officer, Stuart Alderoty, also stated that the agency’s appeal brief reiterates arguments that have already been unsuccessful and will probably be dropped by the next administration.
While the battle between Ripple and the U.S. SEC still stands, Reuter recently reported that under President Donald Trump’s leadership, the SEC could halt its litigation in cases that don’t involve fraud allegations, effectively leaving cases related to securities law violations unfinished.
