US SEC faults judge, hints at appealing Ripple ruling

The U.S. Securities and Exchange Commission (SEC) has hinted at the possibility of appealing the July 13 ruling in its lawsuit against Ripple Labs.

According to the SEC, the ruling goes against existing securities laws and principles, notably the Howey Test, which determines whether an investment contract classification is appropriate. The regulator also confirmed that it was “considering various avenues for further review,” suggesting it would not quickly give up on the case.

Judge Analisa Torres found that the direct sale of XRP, Ripple’s native token, to institutional investors violated SEC rules. However, it was okay for retail investors to buy the same token on exchanges. 

The SEC is displeased with the judge’s ruling’s second part, as the regulator believes that it “establishes an arbitrary differentiation between the anticipations of knowledgeable institutional and individual investors.”

Do Kwon, Terraform Labs, use XRP case in new motion

The SEC made the remarks in its response to a motion to dismiss filed by Terraform Labs and its founder, Do Kwon, in a lawsuit brought against them for their alleged involvement in a massive crypto asset securities fraud worth billions of dollars.

The two accused have cited the precedent set by the Ripple case to support their motion to dismiss the SEC’s case against them.

But according to the SEC, much of the Ripple ruling supports its claims in the Terraform Labs case. At the same time, the regulator disagreed with certain aspects of the verdict, claiming it introduced “baseless requirements” to the Howey Test and its related principles.

Previously, the SEC Chair, Gary Gensler, expressed disappointment over the court’s decision to classify XRP differently for institutional and retail investors. 

In a July 17 interview, Gensler stated that while he was happy with the court’s decision that crypto tokens could be deemed securities for institutional investors, he was disappointed by its pronouncement on retail investors. He added that the Commission was “considering” what to do next.

The SEC’s potential appeal has sparked interest in the crypto community, as it could have significant implications for the status and classification of digital assets in the United States. Investors and industry participants await further updates on the SEC’s next course of action and how it might impact the broader cryptocurrency landscape.