Ripple vs SEC: Next Phase Begins with Appeal Filing

TLDR

• SEC filed notice to appeal July 2023 court ruling on Ripple case
• Ripple CEO and CLO criticize SEC’s decision, vow to continue fighting
• XRP price dropped 11% following appeal announcement
• Ripple considering cross-appeal on institutional sales ruling and $125M fine
• Bitwise filed for XRP ETF despite ongoing legal battle

The U.S. Securities and Exchange Commission (SEC) has filed a notice to appeal parts of the July 2023 court ruling in its case against Ripple Labs, reigniting the long-running legal battle over the status of the XRP cryptocurrency.

The move comes just days before the October 7 deadline for filing an appeal.

In July, New York District Court Judge Analisa Torres ruled that XRP was not a security when sold on public crypto exchanges, dealing a significant blow to the SEC’s 2020 lawsuit alleging Ripple had conducted unregistered securities offerings through XRP sales.

However, Judge Torres also ruled that XRP sales to institutional investors should have followed securities laws, fining Ripple $125 million for those transactions.

Ripple CEO Brad Garlinghouse responded forcefully to the SEC’s appeal, stating on social media platform X:

“Somehow, they still haven’t gotten the message: they lost on everything that matters.”

If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC.

Somehow, they still haven't gotten the message: they lost on everything that… https://t.co/1hW7xVSL9b

— Brad Garlinghouse (@bgarlinghouse) October 2, 2024

Garlinghouse vowed to “fight in court for as long as we need” while emphasizing that “XRP’s status as a non-security is the law of the land today.”

Stuart Alderoty, Ripple’s Chief Legal Officer, called the SEC’s appeal “disappointing, but not surprising.”

(1) The SEC's decision to appeal is disappointing, but not surprising. This just prolongs what's already a complete embarrassment for the agency. The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course,… https://t.co/PQozMMtthf

— Stuart Alderoty (@s_alderoty) October 2, 2024

He noted that Ripple is “evaluating whether to file a cross-appeal,” potentially challenging the ruling on institutional sales or the $125 million penalty. Alderoty has until October 18 to inform the court of Ripple’s decision regarding a cross-appeal.

The news of the SEC’s appeal had an immediate impact on the cryptocurrency markets, with XRP’s price dropping approximately 11% in the 24 hours following the announcement. At the time of writing, XRP was trading at $0.5331.

The appeal will now move to the U.S. Court of Appeals for the Second Circuit. Legal experts suggest that a final ruling from the appellate court is unlikely to come before early 2026.

Lawyer Fred Rispoli outlined a potential timeline, estimating that briefs would be filed in early 2025, with oral arguments possibly occurring in September or October 2025.

Despite the ongoing legal uncertainty, some in the crypto industry remain optimistic about XRP’s future.

Cryptocurrency analyst CredibleCrypto highlighted that Bitwise, a major crypto asset manager, filed for an XRP exchange-traded fund (ETF) shortly before the SEC’s appeal announcement.

The analyst suggested that XRP could be next in line for ETF approval after Bitcoin and Ethereum, regardless of the current legal proceedings.

The SEC’s appeal comes amid broader changes at the agency. Gurbir Grewal, the SEC’s Director of the Division of Enforcement, resigned just hours before the appeal was filed.

This departure has raised questions about the future direction of the SEC’s approach to cryptocurrency regulation and enforcement under Chair Gary Gensler’s leadership.

As the legal battle continues, both Ripple and the SEC face high stakes. For Ripple, the outcome could significantly impact its business model and the regulatory status of XRP.

For the SEC, the case represents a crucial test of its authority to regulate the cryptocurrency industry under existing securities laws.