The legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple is still making waves. In mid-August the judge gave the SEC the green light to appeal the court's July ruling.
SEC Appeals, Ripple Ready to Push Back
On July 13, Judge Analisa Torres, of the Southern District of New York, ruled that XRP, Ripple Labs' base cryptocurrency, was not a security for programmatic sales. This was only a partial win for Ripple, as Judge Torres also determined that XRP did constitute a security when sold to institutional investors. Despite this, the cryptosphere saw the ruling as a significant victory and a judgment that would prove necessary to define the legal framework for other digital currencies and companies engaged in similar fights with the SEC.
However, on August 15, Judge Torres granted the SEC's request to file an interlocutory appeal. This is far from a guarantee; indeed, the Second Circuit still needs to consider their appeal request. According to court documents, the SEC was required to file its request by August 18. All defendants were then required to file their opposition documents by September 1st, and the SEC must file its response by September 8. With a clear intent to appeal, it is very likely that the SEC will see this case through to the end.
However, in a September 1 court filing, Ripple argued that the SEC lacks valid grounds for an appeal, citing the absence of "exceptional circumstances." Ripple also contended that the summary judgment doesn't pose a critical legal question that justifies an immediate appeal. The firm highlighted that a quick review without extensive record examination is required for such appeals, which isn't the case here.
Furthermore, Ripple asserted that an interlocutory appeal should be granted only if it expedites the case's conclusion. The crypto firm claims that the SEC's intention to pursue the lawsuit even after an appeal victory indicates no closer ending for the lawsuit, making the appeal unnecessary. Ripple urged the court to deny the SEC's request to a stay of proceedings, arguing that the SEC failed to meet the necessary standard for such.
The judge has also filed a notice of appearance for Andrew A. Kunsak, from law firm Sidley Austin LLP, to appear as an investment banker declarant. This move would potentially prevent the disclosure of confidential information pertaining to the Hinman Speech Documents. Kunsak's involvement is primarily geared towards safeguarding the interests of their stakeholders and mitigating uncertainties. This becomes especially pertinent as the SEC seeks to appeal the Court's summary judgment ruling. Ripple had previously contested the idea of an investment banker declarant being part of the proceedings.
SEC and the U.S. Crypto World Are Both Affected
Ripple co-founder Chris Larsen has said that the recent federal decisions have negatively impacted San Francisco's former position as a hub for crypto and blockchain innovation. He suggested that the United States has lost its position as the global leader in blockchain technology to cities like London, Singapore, and Dubai.
When discussing the XRP case, Larsen argued that the SEC lost on key aspects that were important to both the agency and the regulation of the industry. While acknowledging the ongoing appeal process, he described the case's outcome as highly significant for both Ripple and the cryptocurrency sector, marking a pivotal moment in the industry's development.
The U.S. screwed up here on crypto and blockchain policy. This is the beginning now through the courts, unfortunately instead of through regulators, to get that clarity and get us back in the game.
Larsen didn't mince words in his criticism of Gary Gensler, the SEC's chief, for what he saw as a regulatory strategy driven more by enforcement actions than by well-defined legislative guidelines. He argued that crucial regulatory decisions, such as those involving Ripple, XRP, or any potential Bitcoin Spot ETF, should fall within the domain of Congress. Larsen asserted that it's essential to establish clear rules through legislative processes rather than relying on unelected and, in his view, misplaced decision-makers.
XRP Drops, Fans Hope to Reach $10 Mark
Despite a slight decline in XRP's price, Ripple recently executed a substantial XRP transfer to a major cryptocurrency exchange, as reported by blockchain tracker Whale Alert. A transaction involving 29,700,000 XRP was directed to Bitstamp, which, according to data furnished by Bithomp, was sent by Ripple. The firm initiated this transfer, involving nearly 30 million XRP, with the intention of selling it for about $15 million.
Following the recent updates in the Ripple SEC lawsuit, rumours that XRP could soar to a $10 level have taken XRP enthusiasts by storm. Many believed that Ripple's partial win in July would take the currency to new highs. The price did record an increase following the ruling but has since dropped as the SEC filed for appeal. We'll continue to Observe.
Timeline of events
Check out Observers' coverage of the entire lawsuit timeline:
- September 8: The SEC's deadline to file its response.
- September 1: Ripple filed its response to the appeal and stated that the SEC lacked any legal grouds for the appeal to be successful or relevant.
- August 18: Court deadline for the SEC to file its appeal.
- August 15, 2023: Judge Torres granted the SEC's request to file an interlocutory appeal. She also filed a notice of appearance for an investment banker declarant.
- July 13: Judge Torres ruled that XRP is not a security in the case of programmatic sales but that the token does meet the definition of security for sales made to institutional investors. This decision has prompted various crypto exchanges, including Coinbase, Gemini, Kraken, and Bitstamp, to announce plans to list Ripple's token on their platforms, indicating growing acceptance and positive momentum for the broader crypto market.
- June 13: The Hinman documents were expected to be released.
- June 5: The SEC removed Hinman's biography from its website.
- May 19: Reports emerged that the SEC and Ripple filed a joint letter requesting an extension to submit the Hinman speech.
- May 16: Judge Torres rejected the SEC's motion to keep the Hinman speech sealed.
- April 18: SEC Chair Gary Gensler testified at a congressional hearing without revealing whether ether was considered a security.
- April 16: John E. Deaton shared a 2018 video featuring Tim Draper and Gary Gensler discussing potential lawsuits and the influence on financial regulators.
- March 6: Judge Torres issued an initial ruling excluding expert testimony from the summary judgment process in Ripple's legal battle with the SEC.
- March 3: Ripple filed a Supreme Court letter to Judge Torres.
- January 2023: Multiple organizations, including Coinbase, submitted amicus briefs in support of Ripple.
- November 30, 2022: SEC and Ripple submitted final submissions to the summary judgment motions.
- November 7, 2022: The LBRY blockchain lost a similar case against the SEC, resulting in a decline in XRP's value.
- September 2022: Both the SEC and Ripple filed motions for summary judgment.
- January 24, 2022: Judge Netburn granted the SEC until February 17 to appeal her decision regarding sensitive government documents in the case.
- August 31, 2021: Ripple filed a motion requesting the SEC to disclose its internal crypto trading policies.
- June 14, 2021: The SEC's deadline for disclosing internal crypto trading policies was extended.
- April 13, 2021: SEC Commissioner Hester M. Peirce published the Token Safe Harbor Proposal 2.0.
- March 22, 2021: Judge Netburn distinguished XRP from BTC and ETH in terms of currency value and utility.
- March 8, 2021: The SEC requested an immediate hearing in response to Ripple's arguments.
- January 1, 2021: XRP holders led by John E. Deaton contested the SEC's lawsuit, arguing that XRP is not a security.
- December 21, 2020: The SEC filed a lawsuit against Ripple Labs, Garlinghouse and Larsen.