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Should XRP Holders be Worried About the SEC Appeal — Pro Ripple Lawyer Says No

Published July 24, 2023 2:26 PM
Omar Elorfaly
Published July 24, 2023 2:26 PM

Key Takeaways

  • The SEC’s appeal is likely to lead nowhere
  • The crypto market will continue to benefit from XRP’s win
  • Will the SEC rush to create clear guideline for digital assets?

The US Securities and Exchange Commission has been struggling to maintain its strict stance on crypto since it lost against Ripple Labs in the case of trading XRP. Judge Torres’ ruling decidedly favored Ripple Labs, while leaving time for the commission to file an appeal. However, a crypto legal expert reports that the crypto market has nothing to worry about.

An Appeal Won’t Be A Setback

Earlier this month, Judge Analisa Torres of the United States District Court for the Southern District of New York ruled in favor of Ripple Labs in a lawsuit filed by the SEC that claimed the company traded in ‘unregistered securities’. In her ruling, Judge Torres said that “not necessarily a security on its face.” 

The lawsuit has been going on for more than two, during which the SEC claimed that Ripple raised $1.3 billion in unregistered securities offerings. 

The SEC is now attempting to file for an appeal on some of the factors involved in the case. However, John Deaton, of Crypto Law, a crypto legal firm, says that the SEC’s appeal – that claims that “Contrary to Ripple’s assertions, much of the ruling supports the SEC’s claims in this case,” also that Ripple’s practices do not comply with the Howey test – won’t effectively make any difference. 

“An appeal is not even close to be a setback. First, it will be two years from now before a decision is issued by the 2nd Circuit, if it’s appealed. The Torres Decision is the law until then – at least in the 2nd Circuit,“ reads Deaton’s tweet 

“Second, even if the 2nd Circuit said Torres was wrong regarding her application of the 3rd Howey factor (which I predict they won’t), that doesn’t meant the SEC wins on Programmatic sales (sales on exchanges).”

However, Deaton points out a key point which is that the SEC could seek a different judge to overturn Judge Torres’ decision. Moreover, Deaton adds  that “A fellow District Judge could disagree with her. But I think a fellow judge in the 2nd Circuit is going to be hard pressed to disagree with Judge Torres, especially considering she cited Judge Castel from Telegram.”

The SEC’s Weakening Stance

In the meantime, the SEC is now dealing with a barrage of claims from crypto companies currently facing litigation from the commission.

Most recently, Terraform Labs, a collapsed blockchain protocol and payment platform used for algorithmic stablecoins, is now attempting to dismiss its own SEC case. 

Terraform Labs and CEO Do Kwon make the claim that UST, LUNA, and wLUNA are not securities as they were not sold in the same volumes as XRP was. Moreover, the company’s claims found support when the South Korean court as it decided sales of LUNA and MIR were too minuscule to be considered securities.

On top of that, Coinbase, the biggest US-based crypto exchange also faces SEC scrutiny. However, the company tweeted in celebration of Ripple’s win saying “W for @ripple. W for the industry.” Now, Coinbase is witnessing a surge in its stock (COIN) price as a result of Ripple’s win. 

Finally, following Ripple’s win, the SEC is now facing scrutiny from representatives of the US government. Republican Senator Cynthia Lummis tweeted in celebration Ripple’s triumph saying “I applaud the decision of the Southern District of New York finding that crypto assets traded in secondary markets may not be investment contracts.” She also added “This is the position that 501 of the Lummis-Gillibrand Responsible Financial Innovation Act has taken from the beginning” and that “We need to pass Lummis-Gillibrand to uphold the Howey test as interpreted by the Southern District of New York.”

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