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SEC Prepares To Challenge Ripple Decision
Ripple Lab’s battle with the SEC is far from over.
The judge overseeing SEC vs Ripple gave a summary judgment ruling that the blockchain company’s crypto, XRP, is not a security, nor are sales of the token on secondary markets like crypto exchanges.
While the crypto industry at large celebrated the victory for Ripple, framing it as an outcome that showed cracks in the SEC’s armour, the financial markets regulator contends that the verdict goes against “fundamental securities laws principles” such as the Howey test, which decides what falls under the class of an investment contract.
These latest comments by the SEC about Ripple’s suit were made in a separate case against jailed Terraform Labs co-founder Do Kwon, where the former crypto star is accused of allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”
Do Kwon’s lawyers cited the XRP ruling as a precedent in a recent motion to dismiss the case against the disgraced Terra creator. In response to this motion on July 21, the SEC pinpointed a number of issues it has against US District Judge Analisa Torres’s decision on XRP.
“Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them. SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review.”
What A Potential SEC Appeal Could Mean For Ripple
The SEC plainly called the ruling in the Ripple case a “wrongful decision”, suggesting the commission might pursue an appeal and attempt to stuff the “XRP is not a security” judgment back in the bottle.
The SEC’s latest remarks come on the heels of chairman Gary Gensler saying he was “disappointed” in the judge’s ruling and that the agency is “looking at it and assessing” that option.
The possibility of an appeal in SEC v. Ripple is a coin toss for now, nonetheless. Ripple Labs CEO Brad Garlinghouse is also of the opinion that it may “take years” before the SEC launches an appeal. He added that an appeal by the watchdog would only fortify Judge Torres’ decision that XRP is not a security.