XRP Ruling Needs Appeals Court Review, SEC Says

The U.S. Securities and Exchange Commission (SEC) asked for permission on Friday to appeal a federal judge's ruling that XRP sales through exchanges didn't violate securities law, a day after the judge said the SEC could present its argument.

The SEC petitioned Judge Analisa Torres, of the U.S. District Court for the Southern District of New York, to certify for an interlocutory appeal (meaning an appeal filed before the overall case is concluded) a day after she allowed the request to be made. The federal regulator is specifically appealing the judge's ruling that Ripple's programmatic sales of XRP did not violate securities law because retail investors purchasing the asset on an exchange would not have the same expectations as an institutional investor purchasing XRP directly from Ripple.

"The rulings that the SEC seeks to appeal were legal determinations about the existence of investment contracts based on undisputed facts. The undisputed facts (e.g., Order at 23 (Programmatic Sales are 'blind bid/ask transactions')) present a legal question – can an issuer’s offers and sales on crypto asset trading platforms create a reasonable expectation of profits based on the efforts of others? This legal question is at issue in a number of pending cases, and a Second Circuit ruling will have 'precedential value,'" the filing said.

The ruling could impact other SEC cases, the regulator said, pointing to its suits against Coinbase and Dragonchain, as well as other legal matters like bankruptcies.

In its filing, the SEC noted that its argument focused on the sales of XRP, rather than the asset itself.

"The SEC did not argue here or in Terraform that the asset underlying those investment contracts were necessarily a security (and the SEC does not seek appellate review of any holding relating to the fact that the underlying assets here are nothing but computer code with no inherent value)," the filing said.

Ripple has until Sept. 1, 2023 to file a response to the SEC's motion. The regulator will have another week to reply to the response after that. Should the SEC win Judge Torres' approval for interlocutory appeal, it will need to petition the Second Circuit Court of Appeals to take up the case.