Judge Rejects SEC Appeal Over Ripple Ruling

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The judge in Ripple’s case has denied the SEC’s request to appeal her ruling, stating that the agency failed to demonstrate a significant error in her findings
In her July decision, the judge determined that XRP’s sale complied with federal securities laws, and she found no substantial disagreement with her findings.
The SEC is expected to pursue its appeal in the Supreme Court, as a Ripple defeat could have serious repercussions for its other cryptocurrency-related cases.

The judge in Ripple’s case against the Securities and Exchange Commission (SEC) has said that the agency cannot appeal her ruling over the XRP token because it failed to show a significant enough error in her finding. US District Judge Analisa Torres determined in July that the sale of Ripple’s XRP digital token on public exchanges adhered to federal securities laws because buyers did not have a reasonable expectation of profit based on Ripple’s efforts. The SEC had sought leave to appeal over certain elements of the ruling, but Judge Torres rejected the request, with the SEC now likely to take its appeal to the Supreme Court.

Torres Finds no Fault

In her July 13 ruling, Judge Torres ruled that “XRP, as a digital token, is not in and of itself a “contract, transaction[,] or scheme” that embodies the Howey requirements of an investment contract.” She also ruled that institutional sales of XRP tokens did constitute a securities contract, which formed the basis of the SEC’s appeal; the SEC sought authorization to appeal her conclusions regarding “programmatic” XRP sales and other XRP distributions for services.

Judge Torres found no substantial disagreement with her findings, however, and did not believe an appeal would substantially advance the case. She also noted that her decision did not conflict with a July 31 ruling by U.S. District Judge Jed Rakoff in Manhattan, who acknowledged the SEC’s plausible claim that Terraform Labs’ Terra USD token constituted a security when traded on public exchanges.

Judge Torres clarified that Judge Rakoff was considering Terraform’s motion to dismiss the SEC’s case and had to accept reasonable inferences in the SEC’s favor.

SEC Will Go to Supreme Court

Ripple Chief Executive Brad Garlinghouse posted a light-hearted response to the decision on X, bringing the SEC’s methodology into play:

The SEC’s request to file an interlocutory appeal is DENIED. I’m not a lawyer but it seems the Court just told the SEC: You asked me to apply the “Howey” test, I did, and like it or not, you lost. https://t.co/0E4MS0iuRY pic.twitter.com/bkhCpum17n

— Brad Garlinghouse (@bgarlinghouse) October 4, 2023

The SEC can, and likely will, appeal to the Supreme Court as a defeat to Ripple will have a hugely negative impact on its other cases against crypto companies.

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