The United States Securities and Exchange Commission (SEC) has taken a significant step in its ongoing legal battle with Ripple Labs, requesting the U.S. District Court in the Southern District of New York (SDNY) to certify its interlocutory appeal. This move comes just a day after Judge Analisa Torres granted the agency permission to file the motion.
The SEC’s filing confirms its intention to focus on Judge Torres’s ruling regarding Ripple’s programmatic sales of XRP and other distributions. In her order on July 13, Judge Torres determined that these transactions did not classify XRP as a security asset.
The SEC believes that an immediate appeal is necessary due to the existence of “controlling questions of law as to which there are substantial grounds for difference of opinion.”
One notable point raised by the SEC is the disagreement between Judge Torres and Judge Jed Rakoff, the overseer of the SEC v. Terra case.
Judge Rakoff argued that the Howey test, which determines whether an investment qualifies as a security, does not differentiate between institutional and retail buyers.
Moreover, the SEC expressed concerns that the court’s ruling on Ripple’s programmatic sales and other distributions could have a substantial impact on its ongoing litigations against prominent crypto exchanges, such as Coinbase and Binance.
SEC Admits XRP Not A Security
However, the SEC surprised many by acknowledging in its motion that digital assets, including XRP, are not inherently securities. The agency explicitly stated, “The SEC does not seek appellate review of any holding relating to the fact that the underlying assets here are nothing but computer code with no inherent value.” This admission has generated reactions from various crypto enthusiasts, who view it as a significant development.
Prominent attorney John Deaton, representing over 75,000 XRP holders in the lawsuit, reacted to the SEC’s concession. He emphasized the importance of having the judge explicitly acknowledge that the token itself is not a security, as this was the cornerstone of their argument in the Brief.
I have to say there is no doubt 75K #XRPHolders are a major reason the SEC is conceding this issue. We fought to have the judge actually ✍️ that the token itself is not the security. In fact, it was the first section in our argument in the Brief. https://t.co/ann7Hah7K3 pic.twitter.com/yqodFQ1eAV
— John E Deaton (@JohnEDeaton1) August 18, 2023
Ripple is expected to provide its response to the SEC’s motion on September 1, adding further anticipation to this high-stakes legal battle.
Implications for the Cryptocurrency Market
The SEC’s official acknowledgment that digital assets, including XRP, are not inherently securities marks a noteworthy shift in the regulatory landscape.
This distinction could potentially have broader implications for the classification of other cryptocurrencies and their respective legal disputes. As the case unfolds, market participants eagerly await the outcome, which may shape the future regulatory framework surrounding digital assets.
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