District Judge Analisa Torres has been informed by the U.S. Securities and Exchange Commission (SEC) that they are not appealing her decision on whether XRP is a security. According to Jeremy Hogan, a partner at the legal firm Hogan & Hogan, the securities regulator will not challenge XRP’s non-security status, as he said on Twitter on Wednesday.
Hogan tweeted: “The SEC continues to make dubious decisions and requests an interlocutory appeal.”
He made the fact clear that it should be noted that only the losses on the programmatic and individual sales issues are being appealed, not whether XRP itself qualifies as a security. For this reason, SEC isn’t appealing whether XRP is a security or not, even though the firm has earlier decided to challenge the same.
Hogan explained in another tweet that contesting programmatic sales and contesting XRP’s non-security classification are “two separate issues.”
While continuing with the verdict of Judge Torres that “XRP is not a security,” Hogan explained: “If the SEC wins the appeal on sales, then Ripple couldn’t use exchanges to facilitate sales.” The lawyer further stated that the greater issue at hand is resolving whether crypto exchanges would keep XRP listed. To that end, he expressed this opinion: “I think yes, as long as they can verify the sales are not being made by Ripple”.
Ripple Labs Inc. was founded in 2012 as OpenCoin, but later rechristened itself and launched the XRP token. At the time, there were fewer cryptocurrencies; so, with its fast transaction speeds and ample net coin supply, XRP was viewed as a new and fool-proof solution for frequent cross-border remittances.
Background of the case
In the United States Southern District Court of New York, the U.S. Securities and Exchange Commission (SEC) claimed in 2020 during the proceedings of SEC v. Ripple Labs — that Ripple, the blockchain company and inventor of the XRP cryptocurrency token, raised more than $1.3 billion in 2013 by presenting investors XRP as unregistered securities. Ripple argued that XRP shouldn’t be classified as a security, basing its position on previous remarks made by an SEC director.
On July 13, 2023, the court determined that XRP (and hence cryptocurrency) constituted a security when offered to institutional investors but not when sold to the general public on an exchange.
Gary Gensler, the chairman of the SEC, stated that the securities watchdog is “disappointed” with what Judge Torres remarked about retail investors following his decision in the Ripple lawsuit last month. He, nevertheless, reaffirmed that the SEC would keep taking enforcement proceedings against bitcoin businesses that disobeyed laws. The head of the SEC thinks that cryptocurrencies are “a highly speculative asset class” and “rife with fraud.”
Even though the SEC isn’t appealing whether XRP is a security, the cryptocurrency neoteric stated in a document filed in support of its case against Terraform Labs and Do Kwon that some determinations made in the concerned court judgment regarding XRP were “wrongly decided.” Additionally, District Judge Jed S. Rakoff disagreed with Judge Torres’ stance on XRP in the SEC v. Ripple Labs case.
As the main digital token in question, XRP, Torres determined that the impugned asset “is not in and of itself a ‘contract, transaction, or scheme”‘ that fulfils the “Howey Test requirements of an investment contract.” This judgment is extremely significant for the Ripple defendants as well as the greater digital asset market because the SEC has long held the stance that almost all tokens are investment contract securities in and of themselves.
Since there was a chance for an appeal, the SEC v. Ripple litigation outcome could have still altered the regulatory landscape for the whole cryptocurrency industry. The SEC is protecting individual investors by filing lawsuits against businesses that sell cryptocurrencies as investment contracts. However, now that SEC isn’t appealing whether XRP is a security, the matter stays in a grey limbo for the time being.
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