The United States Securities and Exchange Commission (SEC) has taken a step further in its legal battle with Ripple by submitting its opening brief to challenge a court decision that favored the cryptocurrency company.
On Jan. 15, the SEC argued that Ripple’s sales of XRP to retail buyers should be classified as unregistered securities transactions. The commission claimed that these sales created profit expectations among buyers, meeting the criteria for an investment contract under the Howey Test.
The SEC stated in its filing:
“The district court erred both factually and legally in concluding that defendants’ offers and sales of XRP to public buyers who purchased on crypto asset trading platforms—including retail investors—and Ripple’s offers and sales of XRP for which Ripple received non-cash consideration were not offers and sales of investment contracts.”
This appeal comes after a partial defeat for the SEC in July 2023 when a judge ruled that only XRP sales to institutional investors qualified as securities. The court found that sales to retail investors did not violate federal securities laws, prompting the SEC to challenge this decision.
The legal battle between Ripple and the SEC began in December 2020 and resulted in Ripple being fined $125 million in August 2024. However, the SEC’s appeal has added further complexities to the ongoing dispute.
Ripple’s Response
Ripple’s Chief Legal Officer, Stuart Alderoty, dismissed the SEC’s appeal as a rehash of arguments that have already been rejected by the court. Alderoty emphasized that Ripple remains focused on growth despite the regulatory challenges it faces.
Alderoty stated:
“The SEC’s lawsuit is just noise. A new era of pro-innovation regulation is coming, and Ripple is thriving.”
Ripple CEO Brad Garlinghouse echoed similar sentiments, criticizing the SEC’s actions and calling for a more innovative approach to regulation. He said:
“[The SEC’s brief is] one definition of insanity…. Doing the same thing over and over and expecting different results. Gensler’s SEC really took this to heart.”
As the legal battle between Ripple and the SEC continues, both parties are gearing up for a protracted fight that could have significant implications for the cryptocurrency industry as a whole.