The US Securities and Exchange Commission (SEC) received Ripple Labs' Form C, the Civil Appeal Pre-Argument Statement, on Thursday, October 24. This paper details the main points that the corporation plans to raise in its appeal, which will be reviewed under a de novo standard. This means that the court will not rely on the lower court's decisions but will instead re-examine the issues.

The Four Main Concerns With Ripple's Appeal

Four primary arguments are presented in the appeal. To start, the business questions the validity of Section 5's definition of a "investment contract" under the 1933 Securities Act. "The investment contract, according to Ripple, "must include the key components of (a) a contract, (b) that imposes post-sale responsibilities on the seller, and (c) that provides the buyer a right to demand and receive profits from the seller's activity."

Secondly, Ripple challenges the district court's use of the Howey Test, which is based on the Supreme Court decision SEC v. W.J. Howey Co. (1946). If the court found that a portion of the company's XRP transfers qualified as an investment contract, the business claims it was wrong. In particular, the business questions whether or not there was a financial investment, a shared business objective, and a realistic hope of financial gain independent of any other factors.

Thirdly, the "fair notice" argument is revived by the appeal. Citing evidence of general confusion over the applicability of federal securities laws to digital assets and virtual currencies, the corporation claims it did not have sufficient notice that its actions violated Section 5. This ambiguity, according to Ripple, is in part caused by the SEC's contradictory and purposefully nebulous remarks.

Last but not least, Ripple questions the specificity of the restraining order. Since the injunction only tells the corporation to "obey the law" without giving specific instructions, the business claims it does not satisfy the clarity standards of Rule 65 of the Federal Rules of Civil Procedure. Such an order, according to Ripple, is excessively vague and might impede the company's activities because of the space for interpretation it provides.

Jeremy Hogan, an attorney who is in favor of XRP, remarked on the appeal via X, pointing out that the crypto sector might be in for some serious surprises as a result of Ripple's challenge to the definition of an investment contract. He said that Ripple is taking the matter to the appeals court primarily to help the cryptocurrency industry as a whole. In addition, Hogan noted that a victory on this matter may not release Ripple from the $105 million judgment, but it has the potential to "cripple the SEC enforcement regime" by making it clear that investment contracts must be legally binding.

Additionally, Hogan brought attention to the fact that the fair notice argument has been revived and that the corporation is contesting the specificity of the order. "The most intriguing thing to me is that Ripple is challenging the specificity of the injunction, which essentially states 'follow the law.'" As an injunction, this makes little sense, yet it's typical in securities law matters. Ripple would prefer not to have that injunction looming over its operations, as it also suggests.

Further information on Ripple's stance was given by Stuart Alderoty, the company's chief legal officer, via X. He made it clear that the question of whether XRP constitutes a security is irrelevant to the issue. Alderoty said that XRP and Bitcoin are in a unique position since they are not considered securities. "The SEC has decided not to contest that decision, so it is now legally binding."

Without the SEC presenting fresh evidence or requesting further papers, he assured stakeholders that the appellate court would examine the current record. "While we move forward with this, keep in mind the SEC's overarching goal: to attempt to divert attention and cause uncertainty for Ripple and the industry," he said. "But to be honest, it's now only ambient noise. The most difficult portion of the battle is over. Despite the ongoing appeals process, Ripple's company is seeing daily growth and strengthening.

At the same time, the SEC has asked for January 15, 2025, as the deadline for submitting its main brief. Furthermore, John E. Deaton, an attorney who is pro-XRP, requested to participate as an amicus curiae in the Second Circuit's rendition. "Senate race or not, I don't walk away from what I started," he told FOX Business writer Eleanor Terrett.


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