Ripple Labs has taken a significant step by filing a cross-appeal in the U.S. Court of Appeals for the Second Circuit. They’re challenging several key points from a recent ruling in their ongoing fight with the Securities and Exchange Commission (SEC).
This move comes just a week after the SEC itself filed an appeal. The SEC is targeting specific parts of a 2023 court decision that was somewhat favorable to Ripple regarding its sale of XRP to investors.
The appeals process is expected to stretch into next year. It has already caught a lot of attention due to its potential impact on how digital assets are regulated in the U.S.
Stuart Alderoty, Ripple's chief legal officer, shared his thoughts on X. He stated, “The Appeals Court reviews the record that has already been set, and we have a great record.” He added that “the SEC can’t submit new evidence or ask us to produce more.” This means there won’t be the same drama we saw during the initial litigation.
Ripple’s appeal, filed on Thursday, highlights four critical issues they plan to address. One of the main arguments is that their institutional XRP sales shouldn’t be classified as unregistered securities offerings, which led to a hefty $125 million fine.
Ripple believes the U.S. Southern District Court of New York, under Judge Analisa Torres, misapplied the definition of an “investment contract” from the 1933 Securities Act. They dispute the idea that such a contract must impose obligations on the seller after the sale and give buyers a right to profit from the seller’s efforts.
Additionally, Ripple argues that the court overlooked the broader regulatory uncertainty regarding how securities laws apply to cryptocurrency. They claim the SEC didn’t provide fair notice that selling XRP would violate these laws. This raises important legal questions about how securities regulations apply to digital assets.
On the flip side, the SEC is appealing the dismissal of charges related to Ripple’s programmatic XRP sales on digital exchanges and the distributions to employees. The SEC claims these actions violated securities laws.
They are particularly focused on whether Ripple’s executives, Brad Garlinghouse and Chris Larsen, broke securities laws by offering what the SEC considers unregistered sales. Notably, the SEC has not challenged the district court’s finding that XRP itself is not a security. This ruling remains a significant win for Ripple.