Ripple Labs has taken up the challenge SEC in the U.S. Court of Appeals for the Second Circuit, filing a Form C Joint Appeal challenging key aspects of the SEC’s lawsuit. This filing not only challenges a previous ruling classifying certain institutional investors’ XRP transactions as securities, but also directly responds to an October 16 SEC appeal that questioned the district court’s ruling in favor of Ripple earlier this year.
Ripple’s legal challenge by filing Form C
Ripple’s Form C filing The cross-appeal has sparked interest within both the legal and cryptocurrency community, with Stuart Alderotti, Ripple’s chief legal officer, confirming the move in a post on X. According to him, the lawsuit will not come with as much drama as previous parts of the case. The appeals court will only review a record that has already been seized, and the SEC cannot present new evidence or require Ripple to provide more.
Today, Ripple filed a Form C – which includes a list of issues we plan to raise in the cross-appeal. Some things to keep in mind as we move forward:
The case is not about whether XRP, in and of itself, is a security. XRP is in the unique position of being clear (along with BTC) in not being… https://t.co/AmFocAnbPx
– Stuart Alderoty (@s_alderoty) October 25, 2024
The appeal calls for a new review of all issues related to the case, including whether Ripple’s transfers of XRP qualify as securities under the Howey test. The Howey test, established in a 1946 Supreme Court case, determines whether a transaction constitutes an investment contract by evaluating factors such as the investment of funds and expectations of profits from the seller’s activities.
The new review request could have major implications, as it essentially seeks to take a fresh look at these complex issues and how they can apply to cryptocurrencies and other aspects of the industry.
Challenging the SEC’s position on cryptocurrency regulation
Ripple’s Form C filing also aims to address what it describes as vague and inconsistent statements from the SEC regarding the application of securities laws to digital assets. The SEC has long argued that Selling XRP is a securitywhich requires Ripple to follow federal securities regulations. However, Ripple’s latest Form C highlights the lack of regulatory clarity that has left the cryptocurrency industry uncertain about complying with SEC standards.
Based on applications of the Howey test, the court determined that sales of XRP to the general public are not securities. However, it also determined that XRP sales to institutional investors in its early days were classified as unregistered securities offerings, prompting Ripple to pay a $125 million civil fine.
By requesting a new review and applying the Howey test, Ripple Aim for the heart She was asked to pay $125 million.
The outcome of this cross-appeal could have far-reaching consequences for the broader cryptocurrency industry. If the court sides with Ripple, the ruling could set a precedent for future cases, potentially setting new limits on the SEC’s crackdown on the cryptocurrency industry. A ruling in favor of the SEC could enhance the regulator’s ability to enforce securities laws to the industry.
Featured image from Fox Business, chart from TradingView