The legal fight against Ripple Labs and the U.S. Securities and Exchange Commission (SEC) is still unfolding and spreading ripples throughout the crypto industry. The SEC has now filed a “Civil Appeal Pre-Argument Statement,” often referred to as ‘Form C,’ moving closer in its bid to challenge an important ruling from the U.S. District Court for the Southern District of New York. The gist of the argument is whether XRP, Ripple’s token, underlines a speculative asset or affects security laws.
If the lawsuit is pursued by the SEC, it would have major ramifications for cryptocurrencies in that region as to how digital assets like XRP could be classified under American law.
SEC’s Position: Challenging the Court’s Judgment
Among them, the SEC is challenging a number of key elements within the court ruling. In particular, the agency is appealing a decision that sales of XRP were not securities trades when Ripple made them to digital asset exchanges between 2013 and 2020. According to the agency, this ruling flies in the face of years and decades again of Supreme Court precedent and established securities laws.
The SEC additionally seeks to further examine the contributions of Ripple CEO Brad Garlinghouse, and co-founder Chris Larsen. According to the agency, both executives helped Ripple carry out its offers and sales of XRP — which it claims should have been treated as securities.
The SEC’s Form C outlines its position clearly: “Whether the district court erroneously granted partial summary judgment in favour of defendants with respect to Ripple’s offers and sales of XRP on digital asset trading platforms (and Garlinghouse’s and Larsen’s aiding and abetting of those offers and sales)… These issues are to be reviewed de novo,” the filing stated. A “de novo” review means the court would re-examine these issues from scratch, focusing on whether the legal principles were correctly applied.
Ripple’s Response: “No Surprises Here”
Ripple has very promptly come back to the SEC’s filing. Ripple’s CLO G scored a Twitter touchdown, posting, “No surprises here — once again, it’s clear as day. NOT being appealed: “The Court’s ruling that ‘XRP is not a security’. That portion of the court ruling still holds, said Alderoty — making XRP “the law of the land” as an enforcement decision.
Alderoty further confirmed that Ripple will submit its own Form C within a week to address all legal outstanding points.
The Roots of the Dispute: A Long-Running Case
The SEC sued Ripple in December 2020, alleging that the company raised $1.3 billion by selling XRP tokens as unregistered securities. Central to the matter was whether or not XRP is a security under U.S. law — specifically, per the Howey Test: legal principles by which courts determine if certain transactions constitute investment contracts
In July 2023, U.S. District Judge Analisa Torres handed down a mixed ruling that was in favor of Ripple on some grounds, namely finding the programmatic sales — conducted via exchanges and through blind bid process were not securities violations against XRP. On the other side of that fence, the court did find another activity constituting securities transactions — Ripple sold XRP directly to large, institutional investors.
This creates the status quo that is at issue in the SEC’s present appeal to ratchet back this distinction and reach more of these programmatic sales on digital asset trading platforms through regulation.
Ripple’s Cross-Appeal: Leaving No Stone Unturned
Ripple has not remained idle in the face of the SEC’s appeal. In October 2024, the company filed a notice of cross-appeal, aiming to protect its legal standing on all fronts. Ripple’s Alderoty explained that this move ensures “nothing’s left on the table,” particularly in relation to the argument that an investment contract requires essential rights and obligations to be found within a contract.
This cross-appeal suggests that Ripple is not only defending its victory regarding XRP’s programmatic sales but is also aiming to challenge any remaining elements of the case that could potentially harm its position in future litigation.
Implications for the Crypto Industry
The SEC lawsuit against Ripple is closely scrutinized by interested parties from across the cryptocurrency arena. This case could have huge implications for how a number of digital assets are classified and regulated within the United States, depending on what is ultimately decided. 88 More from Regulation If the SEC succeeds in convincing courts to more broadly apply securities laws to include trades facilitated by decentralized exchanges, many other cryptocurrency projects face comparable risks.
Furthermore, this case could also offer more insight as to how the Howey Test would apply with regards to digital assets–granting comfort for companies and investors. And until we have a final, absolutely determinative decision in the courts regarding this question of whether these things are securities or not it’s going to remain an open issue and that is leading to litigation regulation around cryptocurrencies.
Conclusion
While SEC vs Ripple drags on through the courts, the fate of both parties — and indeed crypto at large — hangs in the balance. If the court upholds SEC’s attorney urging for a reversal of its decision over XRP programmatic sales, it may become an early precedent in digital assets. It could prove to be a small defender, giving battle guidelines on what can/cannot do. On the other side, Ripple’s defence and cross-appeal indicate that it is going to dig in like a tick when fighting over this thing. The results of the case could have far reaching implications for both XRP as well as future digital asset regulation in America.
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