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SEC Revisits Ripple Case With Familiar ‘XRP is a Security’ Claim

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Prashant Jha
Published
By Prashant Jha
Edited by Insha Zia

Key Takeaways

  • The SEC has filed its opening brief in its appeal against Ripple.
  • The agency seeks to overturn a ruling that XRP is not a security.
  • Crypto attorneys criticize the SEC’s efforts as futile and convoluted.

The U.S. Securities and Exchange Commission (SEC) has officially filed an opening brief in its appeal against blockchain firm Ripple.

The agency is challenging a court decision that ruled XRP was not a security when sold to retail investors, aiming to overturn a major legal victory for Ripple.

SEC Seeks To Regulate XRP as a Security

In its brief, the SEC argued that Judge Analisa Torres’s 2023 ruling  should be dismissed.

The commission contends that XRP transactions qualify as unregistered securities and should be regulated as such.

The regulator emphasized that Ripple’s sales of $2 billion worth of XRP to retail customers violated federal securities laws.

The SEC pointed to three legal precedents, arguing that investors’ intentions behind purchasing XRP do not need to be proven.

Instead, the agency focused on its mandate to enforce preventive measures for investor protection, asserting that the district court’s focus on the seller’s identity was misplaced.

“The Commission’s duty is to enforce the remedial and preventive terms of the statute in the public interest, not merely to police those whose plain violations have already caused demonstrable loss or injury,” the SEC stated.

The appeal also challenges the district court’s distinction between institutional and retail investors, claiming it undermines the objective criteria of the Howey test used to determine whether a transaction qualifies as an investment contract.

Crypto Lawyers Dismiss SEC Appeal as Futile

Pro-crypto lawyer Jeremy Hogan took to social media to criticize  the SEC’s brief, describing it as a futile attempt by outgoing SEC Chair Gary Gensler.

Hogan likened the appeal to a redundant exercise, stating, “Half the brief was spent just reiterating what the trial court ruled. It’s like trying to talk a girl into going out with you and spending half your time telling her why she said ‘no’ previously.”

Ripple’s Chief Legal Officer Stuart Alderoty echoed Hogan’s sentiments, calling the SEC’s arguments a rehash of previously rejected claims. Alderoty expressed confidence that the appeal would likely be abandoned under the next administration, emphasizing Ripple’s optimism about the future.

“We’ll respond formally in due time. For now, know this: the SEC’s lawsuit is just noise. A new era of pro-innovation regulation is coming, and Ripple is thriving,” Alderoty said. 

The Political Shift and Its Potential Impact

Gensler is set to leave the SEC on Jan. 20, coinciding with Donald Trump’s inauguration.

Reports indicate that the incoming administration might withdraw several ongoing SEC lawsuits against crypto firms.

Former SEC executive Marc Fagel noted that while dismissing appeals is unusual, a newly constituted SEC under Trump could potentially vote to dismiss the Ripple appeal.

As the legal battle unfolds, the outcome could have far-reaching implications for the regulation of cryptocurrencies in the United States, particularly under a potentially more crypto-friendly administration.

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Prashant Jha

Prashant Jha is a crypto-journalist focused on the US and UK markets, his interests lie in blockchain technology and crypto adoption across emerging economies.
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