The U.S. Securities and Exchange Commission (SEC) filed an appeal with the United States District Court for the Southern District of New York to challenge the final judgment in its case against Ripple Labs.
The move comes amid the resignation of Gurbir Grewal, SEC’s now-former enforcement director.
According to a court’s ruling on August 7, 2024, Judge Analisa Torres ordered Ripple to pay a $125 million fine for conducting sales of XRP, Ripple’s native token, to institutional investors, which was determined as unregistered security sales in a separate court’s verdict last year.
More Fun For XRP
Judge Torres also reiterated in the August court order that sales of XRP tokens to retail investors in secondary markets were not securities.
The SEC has shown dissatisfaction with Judge Toress’ decision in its cases against Ripple Labs, its CEO Brad Garlington, and co-founder Christian Larsen. Today’s appeal is their action to challenge the court’s decision.
Ahead of the SEC’s move, a former SEC lawyer reportedly said that the SEC would definitely file an appeal as everyone at the SEC believes there were issues with the judgment and are seeking a review from a higher court.
Based on the filing, the appeal will be heard by the U.S. Court of Appeals for the Second Circuit.
In response to the SEC’s action, Ripple’s Chief Legal Officer, Stuart Alderoty, said he was disappointed but not surprised at the SEC’s decision. He argued that the appeal is prolonging a “complete embarrassment” for the regulator.
Ripple is considering a cross-appeal, according to Alderoty, and they are confident in their ability to argue again in court. That means Ripple can file an appeal to challenge the court’s ruling that determined XRP sales to institutional investors were securities and also the $125 fine imposition.
For whatever the decision, the legal battle between the SEC and Ripple will not end soon as expected.
Alderoty added that there could be potential internal changes within the securities agency, especially when the SEC’s appeal comes on the same day Gurbir Grewal stepped down as its Enforcement Director.
XRP ETF On Hold
The SEC’s appeal comes just shortly after Bitwise Asset Manager officially filed an S-1 registration statement with the SEC to launch a spot XRP ETF. The firm aims to provide investors with exposure to XRP.
The filing, announced Wednesday, identifies BNY as the trust’s administrator and Coinbase Custody Trust Company, LLC as the custodian. Bitwise also stated that XRP is not a security, countering previous SEC claims.
With the SEC now appealing the Ripple’s court decision, Bitwise’s filing is now on hold as the legal status of XRP becomes again uncertain.
Approval odds have been speculative even ahead of the SEC’s move. Experts suggest that Bitwise is strategically betting on the outcome of the US presidential election in November. Still, many doubt that approval is likely in the near future as the SEC would appeal Ripple’s case ruling.
However, the asset manager was not unaware of the SEC’s potential appeal. Bitwise said in its ETF filing that:
“If XRP is found by a court or other regulatory body to be a security, the Trust could be considered an unregistered ‘investment company’ under the Investment Company Act of 1940, which could necessitate the Trust’s liquidation under the terms of the Trust Agreement.”
Another asset manager, Grayscale, recently launched a trust product for XRP. According to experts, the move could lay the groundwork for later conversion from a trust to an ETF, similar to what Grayscale did with its Bitcoin and Ethereum Trust.
SEC’s appeal has sent XRP plummeting, with the price falling 9% to around $0.54, per CoinGecko. The token previously surged above $0.6 following Bitwise’s hint at XRP ETF filing.
