Ripple files cross-appeal challenging SEC’s XRP institutional sales ruling

• Stuart Alderoty, Ripple’s chief legal officer, said “the SEC can’t submit new evidence or ask us to produce more”
• Ripple’s Form C requests that each issue is subjected to a de novo standard of review
• Ripple’s cross-appeal follows a week after the SEC filed its cross-appeal against a previous ruling that partially favored Ripple

Ripple Labs has filed a Form C cross-appeal in the US Court of Appeals for the Second Circuit contesting issues in a ruling in its legal battle with the US Securities and Exchange Commission (SEC).

Stuart Alderoty, Ripple’s chief legal officer, posted the news on X, adding “the SEC can’t submit new evidence or ask us to produce more.”

Today, Ripple filed a Form C – listing the issues we plan to raise on our cross appeal. A few things to keep in mind as we move forward:

The case is not about whether XRP, in and of itself, is a security. XRP is uniquely situated as having clarity (alongside BTC) in not being… https://t.co/AmFocAnbPx

— Stuart Alderoty (@s_alderoty) October 25, 2024

Ripple filed its notice of what exactly it's appealing, WHICH IS:

1. Whether an "investment contract" must actually be a legal contract. IMO, Ripple is bringing this issue to the appeals court mainly for the benefit of the crypto space in general because Ripple's direct sales of… https://t.co/8xrNNdyylK pic.twitter.com/Hv6YufCK3u

— Jeremy Hogan (@attorneyjeremy1) October 25, 2024

Ripple’s Form C lays out the issues in its appeal, requesting that each is subjected to a de novo standard review of the case. A de novo is when a court may look over court documents, as if for the first time, without referring to previous decisions.

Ripple’s appeal focuses on whether it should have labeled its XRP institutional sales as registered securities, which resulted in US District Judge Analisa Torres’s $125 million fine against the company last August.

The appeal also has issues with applying the Howey Test to Ripple’s XRP transfers. This is a legal framework to determine if a transaction is an investment contract.

The SEC’s appeal

Ripple’s move comes after the SEC filed a last-minute appeal last week that questioned an August 2023 ruling handed down by Judge Torres, partially favoring Ripple.

Last July, Judge Torres ruled that XRP wasn’t a security when it came to sales to the public, its employees, and developers, marking a huge win against the SEC. Yet, with direct sales to institutional investors, Torres found that these sales were securities, hence the $125 million fine.

The SEC isn’t contesting the court’s ruling that XRP isn’t a security to retail investors on digital asset platforms; however, the agency is focusing on whether Brad Garlinghouse, Ripple’s CEO, and Chris Larsen, co-founder of Ripple, violated securities laws by offering, what it believes are, unregistered sales.

In 2020, the SEC sued Ripple, Larsen, and Garlinghouse, after alleging that they raised $1.3 billion through the sale of XRP, an unregistered securities offering, according to the regulator.