Ripple contests prior ruling’s Howey test application on XRP institutional sales in appeal
2024-10-25

Ripple Labs submitted its Form C filing on Thursday as part of the continued legal dispute with the U.S. Securities and Exchange Commission. 
Form C, a pre-argument statement for civil appeal, outlines the specific grounds on which the company challenges the previous ruling from the Southern District of New York court.
In the filing, Ripple requested the appeals court to approach with a “de novo” standard, which means asking the court to re-examine a decision based on questions on how the law was applied. 
One of the main subjects of appeal is the district court’s application of the Howey test to Ripple’s XRP transfers, which were an investment of money in a common enterprise with a reasonable expectation of profits solely from Ripple's efforts. This concerns the classification of XRP in institutional sales as securities transactions.
Another is whether the court decision took into account Ripple’s lack of fair notice in its conduct, which is seen as a rule violation due to the SEC’s “inconsistent” and “deliberately vague” statements regarding the application of federal securities laws. 
Ripple also seeks to reassess what “essential ingredients” are needed for a transaction to be classified as an investment contract and the scope of the SEC’s injunction against Ripple.
“The Appeals Court reviews the record that has already been set … and we have a great record,” Ripple's Chief Legal Officer Stuart Alderoty wrote on X. “The SEC can’t submit new evidence or ask us to produce more. Meaning, there won’t be all the drama we had in the litigation when we fought over documents.”
Alderoty also stated that XRP has been cleared as a non-security and that the SEC is not challenging.
Ripple’s Form C comes a week after the SEC filed its pre-argument statement, where the agency requested the court to reevaluate whether the district court made an error by granting judgment in favor of Ripple regarding the offers and sales of XRP on trading platforms.
The SEC did not immediately respond to The Block's request for further comments.
Ripple v. SEC
The legal battle between Ripple and the SEC started in 2020. The agency accused Ripple of raising $1.3 billion through the sale of XRP, which it viewed as an unregistered security.
Last year, U.S. District Court for the Southern District of New York Judge Analisa Torres ruled that some of Ripple’s XRP sales, called programmatic, did not violate securities laws because they were conducted in a blind-bid process. 
However, Judge Torres also ruled that other direct sales of XRP to institutional investors were securities. Later in August, Judge Torres ordered Ripple to pay $125 million in fines, much lower than the $2 billion penalty proposed by the SEC.
“Please remember the SEC’s broader strategy: try to create distraction and confusion for Ripple and the industry,” Alderoty wrote. “But honestly, it’s just background noise now. The hard part of the fight is behind us.”
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