The U.S SEC is contending with the previous ruling in its ongoing case with Ripple that XRP sales on the exchange are not securities
The fight between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has taken another dramatic turn. On Wednesday, the regulatory agency appealed against a July 2023 court ruling.
The decision had partly favored Ripple and limited the agency’s claims. At the center of this clash is the issue of whether Ripple’s XRP sales to everyday investors are illegal under securities laws. The outcome could change how cryptocurrencies are regulated in the U.S.
The SEC’s Case: Why XRP Might Be a Security
The SEC argues that Ripple’s sales of XRP violated federal securities laws. To back its claim, the agency uses the Howey Test. This is a legal standard designed to determine whether something qualifies as an investment contract.
According to the SEC, Ripple’s marketing efforts made investors believe they could profit from XRP. The agency argued that this put the asset firmly in the security category. A key part of the SEC’s argument is that it does not matter where or how XRP was sold.
This includes sales directly from Ripple or on crypto exchanges. The SEC believes the promises of profits tie the asset to Ripple’s efforts, making the sales unlawful. The SEC also disputes how Ripple has used XRP in non-cash transactions such as paying employees or rewarding business partners.
These deals, the SEC claimed, still meet the “investment of money” requirement of the Howey Test. Ripple, however, insists that these non-cash transactions do not fall under securities law, furthering its argument that XRP is a currency, not a security.
Ripple Strikes Back: “Same Old Arguments”
Ripple’s Chief Legal Officer, Stuart Alderoty, did not mince words in his response to the SEC’s latest filing. He dismissed the appeal as a “rehash of failed arguments.” Ripple has often criticized the SEC’s enforcement approach.
It views this as a larger attack on innovation in the crypto industry. Alderoty believes the case may lose steam when the new SEC Chair, Paul Atkins, resumes office under the Trump administration. Alderoty predicts Atkin will take a friendlier approach to digital assets.
Ripple has framed this battle as more than just a legal issue. For the company, it is about protecting the future of crypto innovation in the U.S. and creating clear rules for the industry to grow.
This legal fight is not just about Ripple. It is about setting the tone for how digital assets are regulated across the board. If the SEC wins, it could ramp up enforcement against other crypto projects, potentially slowing innovation.
However, if Ripple comes out on top, it could limit the SEC’s reach and encourage more businesses to explore blockchain technology. The stakes are high for both sides. Lawmakers and investors are watching closely to see how the courts will rule.
The decision could support traditional regulations or lead to a new approach for digital assets. The legal battle began in 2020 and has already shifted the crypto landscape. However, this latest appeal signals that the fight is far from over.
A final decision likely will not come until later this year, keeping the industry in suspense.
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