Originally published on: October 25, 2024
Ripple Labs has taken a bold step by filing a Form C in the United States Court of Appeals for the Second Circuit to contest a recent ruling from the US Securities and Exchange Commission. The company’s chief legal officer, Stuart Alderoty, confirmed this move in a recent post. According to Alderoty, the SEC is not allowed to present new evidence or request additional information from Ripple.
The filing comes in response to a decision made by the US District Court for the Southern District of New York back in August, which levied a hefty $125 million fine on Ripple for its institutional XRP sales. The court ruled that these sales qualified as securities transactions.
In its appeal, Ripple challenges the court’s finding that its institutional sales directly to accredited investors should be classified as securities transactions. The appeal specifically disputes the court’s use of the Howey test, a legal standard that determines whether a transaction is an investment contract.
The Form C filed by Ripple lays down the legal foundation for its appeal and requests a de novo review of the case. This type of review allows the appeals court to re-evaluate the legal interpretations made by the district court without being bound by its previous decisions.
Despite the SEC’s attempt to create confusion and distractions, Alderoty remains optimistic about Ripple’s chances. He believes that the noise created by the SEC is merely background chatter that will not affect the company’s appeal.
This filing comes on the heels of an appeal made by the SEC on October 16, questioning the district court’s partial summary judgment in favor of Ripple. While the SEC did not challenge the ruling that XRP is not a security for sales on digital asset exchanges, it sought a review of the court’s application of securities law to institutional sales.
Judge Analisa Torres previously ruled in favor of Ripple Labs in July 2023, determining that XRP is not a security when sold programmatically on digital asset exchanges.
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