Ripple Labs escalates dispute with SEC, files notice of cross-appeal
2024-10-11

Ripple Labs has filed a notice of cross-appeal in its ongoing legal battle with the United States Securities and Exchange Commission (SEC). 
In an Oct. 10 filing in the US District Court for the Southern District of New York, Ripple disclosed plans to take its cross-appeal to a higher court, specifically the Court of Appeals for the Second Circuit. The notice is a legal step to formally register the cross-appeal.
The Court of Appeals will review both the original appeal by the SEC — which its notice was filed on Oct. 2 — and Ripple’s cross-appeal to determine if any legal or procedural errors were made in a decision from Aug. 7. During that time, a federal judge ordered Ripple Labs to pay a $125 million civil penalty for violating securities laws.
The regulator previously requested the courts to impose a $2 billion fine against the company, while Ripple argued that any penalty should not exceed $10 million. 
The legal dispute between the blockchain company and the US financial watchdog started in 2020 when the SEC alleged that Ripple’s sale of its cryptocurrency token, XRP, constituted an unregistered securities offering. 
In a key decision in July 2023, Judge Analisa Torres ruled that while Ripple’s sales of XRP to institutional investors violated securities laws, its programmatic sales — to the broader public and distributions to employees and developers — did not constitute securities sales.
“The SEC lost on all key points—that’s why they appealed. Today, Ripple filed a cross-appeal to ensure nothing’s left on the table, including the argument that there can’t be an “investment contract” without there being essential rights and obligations found in a contract,” Ripple’s chief legal officer Stuart Alderoty noted on X. 
The Howey test determines whether a transaction qualifies as an investment contract and thus falls under the US securities law. 
According to the test, a transaction is considered an investment contract if it involves an investment of money and a common enterprise with an expectation of profits derived primarily from the efforts of others.
According to Alderoty, the SEC will not appeal the ruling that XRP is not a security. “They even apologized in another case for suggesting a token itself could be a security!,” said the executive. “That’s the law, and an appeal on these other issues doesn’t change it.”
Both Ripple and the SEC are expected to present further arguments in the coming weeks following the recent cross-appeal and appeal filings. 
The timeline for these developments remains uncertain. It’s also unclear whether the SEC intends to focus only on disputing the fines imposed on Ripple or if it will continue to challenge the broader ruling regarding XRP’s status.