XRP Price Tumbles After SEC Files Notice to Appeal to Overturn July 2023’s Landmark Ruling on Ripple’s Token Sales
2024-10-03

The U.S. Securities and Exchange Commission (SEC) has moved to challenge the court’s ruling in its ongoing case against Ripple Labs, according to a report by Nikhikesh De for CoinDesk. On Wednesday, the SEC filed a “notice of appeal” with the Second Circuit Court of Appeals, roughly two months after Judge Analisa Torres issued a final decision.
Back on 13 July 2023, the Hon. Analisa Torres, a district judge at the United States District Court for the Southern District of New York, gave her ruling in the SEC vs Ripple Labs lawsuit, which was initiated in December 2020.
The SEC had filed a lawsuit against Ripple Labs Inc. and its two senior executives, Bradley Garlinghouse and Christian A. Larsen. The SEC had claimed that Ripple and its leaders unlawfully offered and sold securities, which breached Section 5 of the Securities Act of 1933. The SEC had further accused Garlinghouse and Larsen of aiding and abetting these violations committed by Ripple.
Both parties had submitted their summary judgment motions to the court. After reviewing the case, the court made a decision, partially granting and partially denying the motions from both the SEC and Ripple and its executives.
According to the ruling, the court granted the SEC’s motion for summary judgment concerning the Institutional Sales but denied it for other matters. On the other hand, the court granted Ripple’s motion for summary judgment regarding the Programmatic Sales, the Other Distributions, and the sales made by Larsen and Garlinghouse. However, the court denied Ripple’s motion concerning the Institutional Sales. As for the SEC’s motion for summary judgment on the aiding and abetting claim against Larsen and Garlinghouse, it was DENIED.
In particular, with regard to Larsen’s and Garlinghouse’s XRP sales, the judge said:
“Like Ripple’s Programmatic Sales, Larsen’s and Garlinghouse’s XRP sales were programmatic sales on various digital asset exchanges through blind bid/ask transactions … Larsen and Garlinghouse did not know to whom they sold XRP, and the buyers did not know the identity of the seller. Thus, as a matter of law, the record cannot establish the third Howey prong as to these transactions. For substantially the same reasons discussed above … Because the Court determines that the record does not establish the first Howey prong as to the Other Distributions, the Court does not reach whether the second or third Howey prongs have been satisfied … Garlinghouse’s offer and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts.“
Here is what Judge Torres said about the XRP token:
“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.“
With regard to secondary market sales of XRP, Judge Torres said:“In any event, the SEC does not develop the argument that these secondary market sales were offers or sales of investment contracts, particularly where the payment of money for these XRP sales never traced back to Ripple, and the Court cannot make such a finding.“
Although the SEC initially sought to appeal this partial victory through an interlocutory appeal, it was denied. Now, the regulator is taking a different path with a full appeal.
In August 2023, the court ordered Ripple to pay a fine of $125 million, which is much less than the $2 billion sought by the SEC, which included interest and penalties. The court’s enforcement of the fine is currently on hold until the appeal process is completed.
The SEC’s spokesperson, commenting on the decision to appeal, stated that the district court’s ruling contradicts long-standing precedents set by the Supreme Court and securities laws. They added that the SEC looks forward to presenting its case in the Second Circuit.
Ripple executives reacted strongly to the SEC’s latest move. C
Yesterday, in a post on X, Ripple CEO Brad Garlinghouse expressed frustration with the SEC and its Chair, Gary Gensler, over their continued pursuit of the legal case against Ripple. Garlinghouse argued that if the SEC acted rationally, they would have abandoned the case long ago, as it has not served to protect investors. Instead, he claimed that the prolonged litigation only damaged the credibility and reputation of the regulatory body.
Garlinghouse emphasized that despite the SEC’s persistence, the agency has lost on the most critical issues. He reiterated that Ripple, the broader cryptocurrency industry, and the rule of law have already prevailed in the case. According to Garlinghouse, XRP’s legal status as a non-security remains the law of the land, and this fact will not change, even with the SEC’s latest appeal, which he described as “misguided” and “infuriating.”
He also referenced the SEC’s previous unsuccessful attempt to file an “interlocutory appeal,” noting that the agency had made it clear at the time that it had no intention of challenging XRP’s non-security classification. Despite the ongoing legal battle, Garlinghouse affirmed that Ripple is prepared to continue defending itself in court for as long as necessary.4o
If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC.
Somehow, they still haven't gotten the message: they lost on everything that… https://t.co/1hW7xVSL9b
Ripple’s Chief Legal Officer, Stuart Alderoty, also took to X to express both disappointment and a lack of surprise at the regulator’s actions. He stated that the appeal only prolongs what has already been a significant embarrassment for the SEC. Alderoty pointed out that the court had previously dismissed the SEC’s claims that Ripple acted recklessly and that the case had never included allegations of fraud or any actual victims or losses.
Alderoty further criticized the SEC’s approach under its current leadership, accusing the agency of engaging in “litigation warfare” against the cryptocurrency industry instead of adhering to the law. He also revealed that Ripple is considering whether to file a cross-appeal. Regardless of their decision, he reiterated that the SEC’s lawsuit against Ripple has been misguided from the outset and expressed confidence that Ripple is prepared to defend itself again in the appellate court, taking a leadership role for the industry.
In a final note, Alderoty questioned the timing of the SEC Enforcement Director’s resignation, which occurred about an hour before the appeal announcement, suggesting that the resignation might be related to the SEC’s continued litigation against Ripple.
While the notice of appeal has been filed, the SEC has yet to submit the actual appeal, which could take months. 
On Monday, Bitwise filed an application to list a spot XRP ETF in the U.S. On Wednesday, the investment firm issued a press release to confirm that it has indeed filed an initial registration statement on Form S-1 with the SEC for a spot XRP ETP.
Bitwise CEO Hunter Horsley had this to say:
“At Bitwise, we believe blockchains will usher in new, apolitical monetary assets and permissionless applications for the 21st century. It’s why for the past seven years we’ve helped investors access the opportunities in the space, and we’re excited to continue that work with our filing for a Bitwise XRP ETP.“
The press release went on to say:
“XRP is the digital asset that powers the XRP Ledger (“XRPL”) public blockchain. XRPL is best known for its role in facilitating cross-border payments and remittances, as well as newer capabilities that enable institutional participation in Decentralized Finance (“DeFi”), real-world asset tokenization, and EVM interoperability. XRPL typically processes transactions in seconds with fees under $0.01. It also has more than five million active wallets and a decade-long track record of reliability.“
Point being that XRP ETF prob coming at some point…
Bitwise just early.
Politics clearly matter here in short-term, but I think this is all inevitable over time.
IMO, Bitwise longer-term roadmap is to offer this in an ETF wrapper.
Next step will be full tokenization. pic.twitter.com/xQUD1wfiAm
Featured Image via Pixabay