- The US SEC’s motion to appeal the court’s decision after its partial loss against Ripple has been denied.
- The regulator failed to meet criteria for burden under law, controlling questions of law, or grounds for differences of opinion.
- Trial set for April 24 to address other issues in the case that require resolution.
Ripple Labs victory over the US Securities and Exchange Commission (SEC) around mid-July has been reaffirmed after a federal judge rejected the commission’s motion to file an interlocutory appeal.
Ripple Labs victory over SEC upheld
Ripple (XRP) victory over the US SEC on July 13 has been upheld, according to a ruling at the District Court on Tuesday, October 3, after Federal Judge Analisa Torres rejected the financial watchdog’s motion to file an interlocutory appeal.
Based on the report, Judge Torres based her decision on the agency failing to meet three criteria under the legal standard, “its burden under the law to show that there were controlling question of law, and that there are substantial grounds for differences of opinion.”
The parties have been asked to submit any motions in limine by December 4 as well as all required pretrial filings, and any oppositions to any motions in limine by December 18, 2023. Before the final pretrial conference in 2024, counsel for both parties, along with the parties themselves, shall meet in person for at least one hour to discuss settlement of the matter.
While the decision caught many off guard, Ripple price reacted with a 7% rise. Nevertheless, the resounding victory for the XRP community does not shut the door completely for the SEC. This is because the commission can still appeal after the trial, set for April 2024, where the court will be addressing other case-related issues that require resolution.
As it turns out, Ripple lawyer John E. Deaton believes this was an easy prediction compared to the ongoing rebuttal between Coinbase and the SEC.
Before the SEC filed its opposition to Coinbase’s Motion to Dismiss, I placed the odds of Coinbase winning at 40% - an extraordinarily high percentage for victory on a Motion to Dismiss. Normally, the odds would be no higher than 10%. After reading the SEC Opposition, the odds… https://t.co/3iTc6uD1lT— John E Deaton (@JohnEDeaton1) October 4, 2023
I confidently predicted the Ripple XRP summary judgment on live TV…and I practically guaranteed Judge Torres would deny the SEC’s request for an interlocutory appeal. I honestly thought those were straightforward calls. But this Coinbase decision is harder to handicap, and I’m trying not to psych myself up too much (and then be disappointed) but I believe Judge Failla could hand down the biggest loss to the SEC to date.
The SEC has been mopped several times in court, with the latest order allowing the Judge to explain parts of her ruling even better. This could make an appeal that much harder for the SEC to win. FXStreet team will bring you an update on the matter once it unfolds.
SEC vs Ripple lawsuit FAQs
Is XRP a security?
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
How does the ruling affect Ripple in its legal battle against the SEC?
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
What are the implications of the ruling for the overall crypto industry?
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
Is the SEC stance toward crypto assets likely to change after the ruling?
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
Can the court ruling be overturned?
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
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