Ripple CEO Strikes: Files Cross-Appeal To Tackle SEC Regulation

• Ripple has lodged a cross-appeal to challenge the $125 Million fine imposed by the SEC for XRP sales.
• The SEC has re-appealed the July ruling that exempted Ripple’s XRP retail sales from being classified as securities.
• Ripple’s CEO is confident that a legal victory will end the SEC’s “regulation by enforcement” strategy.

Ripple Labs has officially lodged a cross-appeal in its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC). This cross-appeal, submitted to the U.S. Court of Appeals for the Second Circuit, addresses aspects of the August 2023 decision.

Ripple’s action follows the SEC’s appeal filed earlier this month. With this cross-appeal, Ripple aims to counter SEC‘s enforcement-based regulation and thoroughly address all legal issues.

Ripple CEO Pledges to Conclude SEC’s Approach This Time

Ripple CEO Brad Garlinghouse is confident that his team will win the appeal. He believes this win will end the SEC’s “regulation-by-enforcement” approach.

Following Ripple’s latest filing, Garlinghouse criticized the SEC for causing disruption and harm to the industry instead of providing clarity.

“With our cross-appeal today, we’re looking forward to sealing the SEC’s fate and finally putting an end to the SEC’s regulation-by-enforcement agenda. Ripple was the industry leader in the first go-round in court and we look forward to leading the way in this round as well,”.

He further stated that Ripple is prepared to endure the ongoing legal battles. In a post on X, Garlinghouse accused the SEC of creating uncertainty rather than offering necessary regulatory guidance.

Garlinghouse remarked, “If Gensler and the SEC cared about the rule of law, they would accept their defeat and move on.” He also claimed that the SEC is not interested in enlightening market participants in the U.S.

Garlinghouse emphasized that Ripple aims to set a precedent to halt what the company views as the SEC’s aggressive regulatory actions. He asserted that the cross-appeal would be the final blow to the SEC and help resolve the ongoing dispute.

Explained: Judge Torres’ Ruling, SEC’s Challenge, and Ripple’s Cross-Appeal as Defendant

Ripple Labs has officially filed a cross-appeal in its ongoing legal battle with the U.S. SEC. This filing, submitted to the U.S. Court of Appeals for the Second Circuit, aims to challenge specific aspects of the August 7 final judgment.

In August, a federal judge ordered Ripple to pay a substantial $125 Million civil penalty for securities law violations. It is related to selling its XRP tokens to institutions, which the SEC claimed were unregistered securities.

However, the court ruled that XRP sales on the secondary market were not securities, which was a partial victory for Ripple. The fine is $125 Million, although it is significantly higher than Ripple’s proposed $10 million.

In contrast, it was much less than the nearly $2 Billion the SEC initially sought. That included extensive disgorgement and prejudgment interest.

Ripple’s cross-appeal comes in response to the SEC’s recent appeal of October 2. It seeks to challenge Judge Analisa Torres’ ruling that programmatic sales of XRP to retail investors did not violate securities laws.

Ripple’s cross-appeal aims to ensure that all issues are thoroughly addressed as the legal process continues. Ripple’s Chief Legal Officer (CLO), Stuart Alderoty, highlighted that the company is disputing the SEC’s claim to ‘investment contracts’.

“The SEC lost on all key points—that’s why they appealed. Today, Ripple filed a cross-appeal to ensure nothing’s left on the table, including the argument that there can’t be an “investment contract” without there being essential rights and obligations found in a contract,”

Stuart Alderoty further stated that the company decided to file a cross-appeal to cover all angles. It is particularly concerned with a contract’s essential rights and obligations.

Alderoty also criticized the SEC’s appeal. He argued that it lacks a strong legal foundation and expressed confidence that Ripple will ultimately prevail.

Why SEC Strives to Challenge Previous Judgments?

The SEC previously accused Ripple of conducting an unregistered securities sale worth $1.3 Billion through XRP. Dissatisfied with the federal judge’s ruling, the SEC filed an appeal on October 2. This appeal was to overturn the decision that XRP sales to retail investors did not breach securities laws.

In July 2023, Judge Analisa Torres ruled that Ripple’s institutional XRP sales violated securities laws. On the other hand, programmatic sales and employee distributions did not. The SEC plans to appeal this ruling, arguing it contradicts earlier court decisions.

“Last year, the SEC unsuccessfully tried to take an early appeal of the rulings that Ripple’s XRP sales on exchanges and Ripple’s other XRP distributions, like to employees and developers, weren’t securities. They’ll likely go after these again – and they will lose on both again,”.

Ripple has firmly rejected the SEC’s claims, insisting that the court’s original decision should stand. Ripple’s Chief Legal Officer, Stuart Alderoty, anticipates that the SEC will lose again in court.

Disclaimer

In this article, the views, and opinions stated by the author, or any people named are for informational purposes only, and they don’t establish the investment, financial, or any other advice. Trading or investing in cryptocurrency assets comes with a risk of financial loss.

Dr. Naveen Singh

Dr. Naveen Singh is an entrepreneur with achievements in sports, academics, healthcare, innovation, blockchain technology, telecommunications, and philanthropy. He is the Co-Founder and Chief Executive Officer (CEO) of Inery, the first layer-1 blockchain programmed for database management. With Inery, he aligns with his vision of a new paradigm for data to empower web3 and complete decentralization.