The U.S. Securities and Exchange Commission (SEC) has filed a motion seeking permission to appeal a recent federal court ruling regarding Ripple’s XRP token. The SEC argues that there are significant differences of opinion regarding how securities laws apply to cryptocurrencies, citing a similar case involving Terraform Labs where the judge ruled differently.
In the motion filed on Friday, the SEC contests two of Judge Analisa Torres’s rulings from last month. One ruling stated that “Programmatic Sales” of XRP, such as secondary market sales, did not meet the requirements outlined in the Howey test. The other ruling stated that “Other Distributions,” such as payments for services, also failed to satisfy the Howey test.
The agency highlights that another court in the same district disagreed with the order’s ruling on Programmatic Sales, further emphasizing the grounds for difference of opinion. This comes after Terraform Labs attempted to dismiss a similar SEC case against the firm, but the judge rejected their reasoning, stating that the distinction between “institutional” and “secondary” market sales is not relevant according to the Howey test.
The SEC refers to previous cases, including its charges against Telegram and LBRY, to support its argument that securities act violations have been identified in transactions conducted through intermediaries, such as exchanges. The agency asserts that the method of carrying out the transaction should not impact the determination of whether Ripple established a reasonable expectation of profit for investors, a key aspect of an investment contract.
Notable lawyers in the crypto space have shared their opinions on the matter. A Bitcoin-supportive litigator, Joe Carlesare, expressed support for the SEC’s appeal, highlighting that the promotions by crypto issuers impact both direct purchasers and secondary market buyers. On the other hand, a lawyer supportive of XRP, Sandy Seth, criticized the SEC’s position, questioning how sales of XRP can be considered sales of a security if XRP itself is not deemed a security.
The SEC’s request for permission to appeal the Ripple ruling indicates that the case is far from over. The outcome of this appeal could have significant implications for the regulatory landscape surrounding cryptocurrencies and their classification as securities.