RippleLabshasfiledaFormCcross-appealintheU.S.CourtofAppealsfortheSecondCircuitaspartofitsongoinglegalbattlewiththeU.S.SecuritiesandExchangeCommission(SEC).ThecompanyseekstoreversecertainpartsofapriorrulingconcerningspecificXRPtokeninstitutionalsales,whichwereconsideredsecurities,andhencesubjecttoafineof$125millionbythecourt.
Ripple’sChiefLegalOfficer,StuartAlderoty,saidtheappealdoesnotchallengeXRP’sstatusasanon-security,asdeclaredintheaforementionedpivotalcourtrulinginJuly.Thesaidcross-appealchallengesthedistrictcourt’sinterpretationofthe1933SecuritiesActregardingXRPsales.
Theargumentrevolvesaroundthemeaningoftheterm‘investmentcontract,’inthatitusuallyinvolvesthedeathofpost-contractualobligationsofthesellerorabuyer’sentitlementtoprofitscreatedfromtheseller’sefforts.
ThefirmarguesthatitsellsXRPneitherattherequestnorfortheaccountofanybuyers.ThatneitheroftheseconditionsappliedtoitsXRPsales,andthecourt’sdecisionwastoobroadinreadingsecurities.
Ripplealsocountersthecourt’suseoftheHoweyTest(1946Courtsstandardtoclassifyatransactionasasecurity).Accordingtothecompany,thecourtdoesn’tgetthe“investmentofmoney”or“commonenterprise”partoftheHoweyframeworkright.
Furthermore,XRPworksinadecentralizedenvironmentwheretheinvestorreturnsarenotentirelybasedonactivities,makingXRPineligiblefromthesecuritiesclassificationusedbythecourt.
Ripple’sFairNoticeDefenseChallengesSECAuthority
RipplehasalsocriticizedtheSEC’sapproach,especiallynotingtherequirementforclearregulatoryguidanceforcompanies.Thefirmalsoclaimsitcouldonlyhavedeliberatelyfloutedtheruleswhenadequatelyinstructed.
IfRipple’sfairnoticedefenseisupheld,itwouldfacilitatethecontinuationoftheproblematicprecedentofregulatoryambiguityforthecryptocurrencyindustry,leadingtoenforcementagainstitsolelyonfairnotice.
Pro-XRPattorneyJeremyHogansaidRipple’sfairnoticeargumentcouldsubstantiallyreducetheSEC’senforcementpowerifsuccessful.Ifthecaseresultsinafavorableoutcomeforthefirm,thefactthatregulatorsmayprovideclearerguidanceforcryptocurrencyfirmscouldalsohelpsettransformativeenforcementlawsmovingforward.
ThispositionclarifiesthatRipplebelievesregulatoryagenciesmustdisclosetheirguidanceandmakeiteasytocomply.Ripplealsoopposesthecourt’sinjunction,whichtoldthefirmtoactaccordingtothelawinawaythatRipplecallsvague.
AccordingtoRipple,thelackofspecificguidelinesmakescompliancechallenging,andtheracetocomeunderitsdragnetslegalriskandhindersoperationalclarity.Thefirm’slegalteambelievesthatsucharefinedinjunctionwouldprovidethefirmandtheindustrywithmoreprecisestandards.
SECAppealsXRPSalesRuling
Atthesametime,RippleisfacinganappealfromtheSECattheSecondCircuitCourt,whichdisputestheprogrammaticXRPsalesandemployeedistributionsmadebyRippleitself.JudgeAnalisaTorres’rulingthatthosesalesdidnotconstitutesecuritiesviolations,theSECwantsitoverturned.
TheSECallegesRippleexecutivesBradGarlinghouseandChrisLarsenhavefacilitatedunregisteredXRPsales,whichRippledisputes.It’sallintheappeal:TheSECneedstoextenditsregulatoryoversightovercryptocurrencytransactions.
IftheSEC’slawsuitsucceeds,itcouldprecedeotherdigitalassetstreatedassecuritiesandrippleeffectontokensalesacrosstheindustrygoingforward.Further,thiscasealsopresentsquestionsabouttheSEC’sregulatoryreachandwhetheritwillstretchtoalldigitalassets,anideathathasattractedheavyscrutiny.
XRPcontinuestoseeinterestinitsongoingexpansionintonewmarketsasRipplehabeendiscussingXRP-backedETFsinrecentdays.ItisnoteworthythatassetmanagerslikeBitwiseandCanaryCapitalhavecontinuedtoshowinterest.
Evidently,thecontinuedwidespreadinterestinXRPamongindustryplayersfurtherreinforcesitslegitimacyandbroadacceptancewithinthecryptoeconomicspace.
thecoinrepublic.com