There has been a new development in the Ripple-SEC case, with the SEC filing an appeal against the district court’s decision regarding Ripple’s XRP sales.
The SEC argued that all transactions involving XRP purchased by retail investors through cryptocurrency platforms were securities under the Howey Test.
On this point, the SEC argued that the district court's decision was erroneous, disagreeing with its previous decision that XRP sales to retail investors under the Howey test did not violate securities laws, and appealed to the court of appeals to overturn that decision.
The SEC also accused Ripple of increasing demand for and the price of XRP through public statements. The SEC argued that Ripple’s promotional activities created the perception that investors, including retail buyers, were likely to profit from XRP.
The SEC also stated that the first instance court made the wrong decision regarding retail XRP sales and included the following statements in its petition:
“The court ruled that sales to institutional investors were securities, but erroneously determined that sales to retail investors were not securities.
Because retail investors purchased XRP through crypto asset trading platforms, they had no idea whether the seller was Ripple, a Ripple affiliate, or someone else.”
Ripple chief legal officer Stuart Alderoty called the SEC's lawsuit “just noise” and said, “As expected, the SEC's objection reiterates arguments that have already failed and will likely be rejected by the next administration. We will respond formally in due time.”
What Happened?
In 2020, the SEC accused Ripple of selling XRP, which it claimed was an unregistered security, and raising $1.3 billion through those sales.
In the long-running case, in 2023, U.S. District Court Judge Analisa Torres of the Southern District of New York ruled that Ripple’s so-called retail sales of XRP did not violate securities laws. However, she ruled that other direct sales of tokens to institutional investors were securities. Judge Torres also ordered Ripple to pay a $125 million fine.
*This is not investment advice.