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Fed Court Denies U.S. SEC’s Appeal on Loss vs. Ripple

Date:

  • District Judge Analisa Torres has denied the appeal of the U.S. SEC to put its case against Ripple Labs, the firm behind the XRP token, as there ‌are “substantial grounds for differences of opinion.”
  • According to the federal judge, the regulatory agency failed to show that there were controlling questions of law or that there were substantial grounds for differences of opinion.
  • Torres then scheduled an April 2024 trial date, so the other issues that still need resolution will be addressed.

A federal judge has rejected the appeal of the U.S. Securities and Exchange Commission, months after the former ruled with Ripple Labs, the crypto firm behind the XRP token. 

U.S. SEC Appeals Loss Against Ripple Labs

In August, the U.S. SEC wrote a letter to District Judge Analisa Torres, who is the presiding judge on its case against Ripple, for “substantial grounds for differences of opinion” on the laws at hand.

The appeal then emphasized that the Commission seeks to certify Torres’ decision that Ripple’s “programmatic” sales of XRP and other ways of the distribution of the token were not securities.

Moreover, the regulatory agency also mentioned another judge, Judge Jed Rakoff, who “disagreed” with the Ripple case’s result, saying that tokens sold on exchanges could also be securities. 

Rakoff is the presiding judge in the SEC’s case against Terraform Labs, the firm behind the infamous TERRA-LUNA token. He recently said that the SEC had a “plausible claim” that the Terra USD stablecoin was a security when sold on public exchanges.

“Interlocutory review is warranted here. These two issues involve controlling questions of law on which there is substantial ground for differences of opinion as reflected by an intra-district split that has already developed,” the SEC stressed.

Basically, the agency was asking Torres to put the case on hold as there were other “large number” of court cases that could be affected by the appeal’s outcome. Currently, the SEC is also in a legal battle with some U.S.-based crypto firms, like Binance and Coinbase, for alleged violations of promoting unregistered securities. 

Judge Torres Rejects U.S. SEC’s Appeal

In a response ruling, Torres explained that the regulatory agency failed to show that there were controlling questions of law or that there were substantial grounds for differences of opinion.

She also expressed her disagreement that the appeal would materially advance the case toward a conclusion.

Furthermore, Torees argued that her decision did not conflict with Rakoff’s statements, adding that Rakoff had in fact been considering Terraform’s motion to dismiss the case. 

Thus, the SEC’s motion for certification of interlocutory appeal is denied, and the SEC’s request for a stay is denied as moot, the judge wrote. 

But to hear more about the regulator’s side, Torres scheduled an April 2024 trial date, so the other issues that still need resolution will be addressed. 

SEC vs. Ripple Labs

In December 2020, the SEC accused Ripple of offering unregistered securities in the form of the XRP token. The said offering allegedly raised $1.3 billion “illegally.” 

After more than half a year of trial, Torres ruled that the sale of Ripple’s XRP tokens on cryptocurrency exchanges and via algorithms are not “investment contracts,” providing some regulatory clarity to the cryptocurrency industry. However, the court found out that Ripple violated the security laws by directly selling its tokens to institutional investors. 

Other rulings, from Atty. Padilla’s case digest, include: 

  • Ripple’s Institutional Sales of XRP constituted an unregistered offer and sale of investment contracts in violation of federal securities laws.
  • Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts.
  • Ripple’s Other Distributions did not constitute the offer and sale of investment contracts.
  • Larsen’s and Garlinghouse’s offers and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts.
  • The defendants’ fair notice defense and as-applied vagueness defense were dismissed.
  • The SEC’s motion for summary judgment on the aiding and abetting claim against Larsen and Garlinghouse was denied.

To learn more about how the case went through, #CryptoPH Champion Atty. Rafael Padilla, a lawyer focusing on fintech and blockchain, digested the case’s decision, the results, and the implications. Read it here. 

This article is published on BitPinas: Fed Court Denies U.S. SEC’s Appeal on Loss vs. Ripple

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