The U.S. Securities and Exchange Commission (SEC) filed a notice of appeal on October 2 in its ongoing lawsuit against Ripple Labs as it seeks to overturn Judge Analisa Torres’ ruling.
The 2023 decision declared that secondary sales of Ripple’s XRP did not classify as securities transactions.
Judge Torres ruled that XRP did not meet all the criteria under the SEC’s Howey test to be considered an investment contract, meaning secondary sales were not unregistered securities. However, she also determined that Ripple’s early sales to institutional investors did constitute securities sales due to how they were conducted. This mixed ruling was viewed as a major victory for Ripple and the broader crypto industry.
On the same day, the SEC’s chief enforcement officer, Gubir Grewal, announced his resignation effective October 11. Grewal, who led over 100 enforcement actions against the crypto industry, has been a polarizing figure. His deputy, Sanjay Wadhwa, will temporarily take over until a permanent replacement is found.
In August, Ripple was fined $125 million as part of its protracted legal battle with SEC. Judge Torres ordered the XRP issuer to pay the fine after finding that its institutional sales violated federal securities laws.
The penalty was well below the $1 billion in disgorgement and prejudgment interest, plus $900 million in civil penalties, initially sought by the SEC.
A U.S. federal court judge also ruled that a civil securities lawsuit against Ripple Labs can proceed, denying the company’s bid for summary judgment in a case alleging its CEO, Brad Garlinghouse, violated California securities laws.
In the 2017 interview on Canada’s BNN Bloomberg, Garlinghouse stated he was “very, very long” on XRP, but the lawsuit claims this was misleading because he “sold millions of XRP” throughout that year.
Meanwhile, interest in Ripple’s XRP continues to grow, as Bitwise filed for an XRP exchange-traded fund (ETF) trust in Delaware on September 30. However, with the SEC’s legal appeal pending, approval for the ETF could be delayed.
