Ripple Labs has filed an appeal, via a Form C, against the recent SEC ruling that classifies institutional sales of XRP as securities transactions, challenging the interpretation of the Howey test used to define investment contracts.
All the details below.
Ripple challenges the SEC with a Form C on the application of securities law to institutional sales of XRP
Ripple Labs, one of the main players in the cryptocurrency sector, has taken a significant step in its legal battle against the United States Securities and Exchange Commission (SEC).
The company has indeed filed a Form C with the United States Court of Appeals for the Second Circuit, contesting a recent ruling that imposes restrictions on institutional sales of XRP, its native digital asset.
This appeal represents a new chapter in the long dispute between Ripple and the SEC. Which revolves around the classification of XRP as a security in cases of direct sales to institutional investors.
The dispute originated from a ruling issued in August by the District Court for the Southern District of New York, which fined Ripple 125 million dollars.
This decision, based on the Howey test, determined that the sales of XRP directed at institutional investors represented securities transactions. A factor that paved the way for potential regulatory implications for the entire criptovalute sector.
However, Ripple believes that this classification is incorrect and has therefore decided to appeal.
Stuart Alderoty, Chief Legal Officer of Ripple, confirmed the news in a post on platform X on October 25, emphasizing that the appeal aims for a de novo review of the case.
A de novo review allows the Court of Appeals to re-examine the legal interpretations issued by the district court without referring to the previous conclusions.
This type of review can prove decisive for Ripple. Which hopes to obtain a reversal of the ruling and establish an important legal precedent in the crypto sector.
Alderoty also expressed optimism regarding Ripple’s strategy. Specifically stating that the SEC “cannot present new evidence or ask Ripple to produce more.”
This means that the case will be re-examined exclusively based on the documents and arguments presented so far. Thus reducing the SEC’s room for maneuver and, potentially, simplifying the legal process for Ripple.
Dispute of the application of the Howey test
According to Alderoty, “the SEC’s strategy of creating distractions for Ripple and for the entire sector is now just background noise.”
The statement reflects Ripple’s intention to maintain a firm position and defend its business against the SEC’s interpretations. These are perceived as arbitrary and harmful to the crypto industry.
One of the central points of Ripple’s appeal concerns the challenge of the application of the Howey test. That is, a legal standard used in the United States to determine if a transaction can be considered an investment contract.
Consequently, subject to securities law. The Howey test provides that a transaction is considered an investment contract. This is if it involves an investment of money in a common enterprise with expectations of profits derived from the efforts of others.
Ripple argues that the use of this test is not adequate for institutional sales of XRP. It therefore contests the application of this standard to its own cases.
The interpretation of the Howey test, according to Ripple, should be updated to better reflect the nature of cryptocurrencies and their mode of use in modern markets.
The appeal of Ripple comes shortly after another appeal filed by the same SEC. On October 16, the SEC requested a review of the decision of a partial summary judgment by the district court.
Which had established that the programmatic sales of XRP on digital asset exchange do not constitute securities.
The SEC, while not contesting this part of the ruling, has put forward further arguments to confirm the classification of XRP as a security in the context of institutional sales.
This highlights the complexity of the case, which involves distinctions between programmatic sales, reserved for a broad audience, and direct sales to accredited investors.
The decisive decisions in the Ripple-SEC case for the crypto world
The lawsuit between Ripple and the SEC has become one of the most followed legal cases in the crypto sector, given its potential impact on the entire cryptocurrency market.
The decision of the court of appeal could establish an important precedent, influencing how cryptocurrencies will be classified and regulated in the future in the United States.
If the court were to decide in favor of Ripple, the company could not only achieve an important victory for itself. However, it could also help to establish a clearer and less restrictive regulatory framework for cryptocurrencies.
Beyond the legal aspect, this battle has raised questions about how the United States intends to regulate the crypto sector compared to other international jurisdictions.
While the SEC continues to adopt a strict approach, some countries, such as the United Kingdom and Singapore, have opted for more flexible regulatory strategies and open to innovation. Thus aiming to foster the development of the crypto sector.
Ripple and other operators in the US crypto market believe that clearer and less punitive regulation could attract more investments and stimulate technological innovation.
In the meantime, Ripple’s appeal continues to be at the center of the legal and regulatory debate.
The next phases of the process will determine whether the court of appeal will accept Ripple’s request to review the case. Furthermore, they will determine whether such a review will lead to a definitive ruling capable of influencing the entire sector.
The case, which involves complex issues such as the definition of digital assets and the application of securities law, will likely continue to attract the attention of both legal experts and the international crypto community.
