In a significant move that could reshape the regulatory landscape for XRP and blockchain payments company Ripple, the US Securities and Exchange Commission (SEC) announced on Wednesday that it is appealing the court ruling limiting its authority over crypto markets.
The appeal targets a July 2023 decision by US District Judge Analisa Torres, which determined that the XRP token, sold by Ripple Labs on public exchanges, does not qualify as a security under existing laws.
SEC Appeals Court Ruling On XRP
The implications of this ruling are substantial. Judge Torres stated that the approximately $757 million in XRP sales on public exchanges did not fall under the SEC’s jurisdiction, thereby exempting these transactions from the investor protection laws the agency enforces.
If the 2nd US Circuit Court of Appeals upholds this interpretation, it could hinder the SEC’s ability to regulate other cryptocurrency exchanges, such as Coinbase, and challenge the agency’s oversight of newer financial products that do not fit traditional definitions.
However, the ruling was not entirely favorable for Ripple. Torres also ruled that roughly $728 million of XRP sales to institutional investors should be classified as securities, requiring compliance with relevant laws.
Ripple CEO Slams SEC’s Appeal
The SEC had originally sought a hefty $2 billion fine against Ripple, but Torres ultimately imposed a $125 million penalty, which is currently on hold pending the outcome of the appeal.
Ripple CEO Brad Garlinghouse expressed his frustration at the SEC’s decision to appeal, calling it “misguided” and “infuriating.” He emphasized that despite the ongoing legal challenges, the current legal status of XRP as a non-security is established:
If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC. While we’ll fight in court for as long as we need, let’s be clear: XRP’s status as a non-security is the law of the land today.
At the time of writing, XRP is trading at $0.5390, down 10% after the SEC appealed the judge’s ruling on Wednesday.
Featured image from DALL-E, chart from TradingView.com