Federal Judge Denies SEC’s Appeal in Ripple Case


On October 3rd, a federal judge made a significant decision regarding the U.S. Securities and Exchange Commission’s (SEC) attempt to regulate cryptocurrency markets through its case against Ripple Labs. The judge, Analisa Torres of the U.S. District Court in Manhattan, denied the SEC’s request to appeal her earlier ruling, which had been viewed as a setback for the regulatory body.

Back in July, Judge Torres had issued a ruling stating that the sale of Ripple’s XRP digital token on public exchanges complied with federal securities laws. She argued that purchasers of XRP had no reasonable expectation of making a profit based on Ripple’s efforts, thus not classifying it as a security.

The SEC had sought permission to appeal specifically regarding Torres’ findings on the “programmatic” sales of XRP and other distributions of XRP as a form of payment for services. They argued that this appeal was crucial given its relevance to a “large number” of ongoing lawsuits. However, Judge Torres disagreed, stating that there was no substantial difference of opinion regarding her findings, and an appeal would not significantly advance the case.

Judge Torres also noted that her decision did not conflict with a ruling made by U.S. District Judge Jed Rakoff on July 31st. Judge Rakoff had mentioned that the SEC had a “plausible claim” regarding Terraform Labs’ Terra USD token being a security when sold on public exchanges. However, it’s important to note that Judge Rakoff was considering Terraform’s motion to dismiss the SEC case and was required to give the regulator the benefit of the doubt.

District Judge Analisa Torres. Source: Columbia Law School

The Ripple case is scheduled for trial on April 23, 2024. The SEC, Ripple, and its key executives, including CEO Brad Garlinghouse and co-founder Chris Larsen, did not immediately respond to requests for comments after the market closed.

In December 2020, the SEC filed a lawsuit against Ripple, alleging that the company had illegally raised over $1.3 billion through an unregistered securities offering by selling XRP. The SEC has maintained that certain digital assets, including XRP, should be classified as securities and fall under its regulatory authority. This case is part of the SEC’s broader efforts to regulate various aspects of the cryptocurrency industry, including ongoing cases against other platforms like Binance and Coinbase.

In her July ruling, Judge Torres concluded that only specific XRP sales violated federal securities laws, adding complexity to the overall case. The case is officially titled “SEC v Ripple Labs Inc et al,” and it is being heard in the U.S. District Court for the Southern District of New York, with case number 20-10832.

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