The legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC) has seen another significant development in favor of Ripple. Stuart Alderoty, Chief Legal Officer (CLO) at Ripple, took to X to highlight a recent Second Circuit Court of Appeals decision that rejected the SEC’s request for a reconsideration in the SEC v. Govil case.
This decision stems from a November 2023 ruling by the same court, where it was established that the SEC cannot demand crippling disgorgement awards from defendants without first proving that investors incurred actual financial losses. In simpler terms, the court determined that the SEC could not seek penalties unless demonstrable harm was inflicted upon investors.
Read Also: XRP Holders Lawyer Explains Why Ripple Would Pay the SEC A Lot Less Than $770 Million
Alderoty drew attention to this ruling in November, using the decision to explain why the SEC could request $770 million in penalties from Ripple. Other experts also drew attention to this ruling at the time, and everyone believed the SEC would only ask a small fine from Ripple.
However, the regulator raised questions about its actions when it requested almost $2 billion from Ripple. The Govil appeal ruling has thrown a wrench in the SEC’s plans.
This latest development is being hailed among Ripple and XRP supporters. The inability of the SEC to secure disgorgement without proof of investor harm presents a major hurdle in their case against Ripple. This ruling sets a precedent that the regulator must prove that investors suffered harm before enforcing a substantial penalty.
It is important to note that the XRP lawsuit is still ongoing. While this recent ruling represents a positive step for Ripple, the lawsuit’s outcome remains to be determined. However, this decision does make it significantly more challenging for the SEC to prevail in its pursuit of disgorgement from Ripple.
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Read Also: Ripple Faces Possible $3 Billion Fine, As XRP Lawsuit Takes New Turn: Details
Will the SEC Continue Losing?
The SEC has faced major losses in crucial cryptocurrency-related legal battles. However, the biggest losses came in the XRP lawsuit, as Ripple has recorded three consecutive victories over the regulator, and a small penalty will mark a fourth and potentially decisive victory for Ripple.
With this latest court decision, the momentum appears to be shifting in favor of Ripple. The SEC faces an uphill battle in proving its case and securing the hefty disgorgement it initially sought if the ruling from the Govil lawsuit is a precedent.
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