The U.S. Securities and Exchange Commission (SEC) is again making waves in the ongoing Ripple Labs lawsuit. In a recent filing, the SEC urged the U.S. District Court for the Southern District of New York to grant its motion for interlocutory appeal, effectively stopping further proceedings until the appeal is resolved.
This move comes after Judge Analisa Torres ruled in July that XRP, Ripple’s native cryptocurrency, does not qualify as a security under SEC guidelines, mainly when distributed via programmatic sales, such as those on cryptocurrency exchanges. However, the SEC has taken issue with this ruling, citing “knotty legal problems” surrounding the application of the Howey Test, a framework used to determine whether an asset qualifies as an investment contract.
The SEC’s latest filing argues that the questions raised by the court’s order on summary judgment present significant legal issues that warrant an interlocutory review. The agency points out a legal gray area in determining whether certain crypto assets should be classified as investment contracts under the Howey Test, highlighting conflicting opinions from various courts.
Interestingly, the SEC’s call for an appeal contradicts previous statements from SEC Chairman Gary Gensler, who has consistently maintained that existing SEC guidelines sufficiently cover the cryptocurrency market. Gensler’s stance has largely been that most cryptocurrencies should be classified as securities.
Ripple’s chief legal officer, Stuart Alderoty, didn’t mince words in response to the SEC’s filing, calling it “hypocritical.” He noted the SEC’s prior insistence that the rules were clear and must be obeyed. Alderoty’s tweet raised why the SEC urgently sought an appeal if the rules were as clear as previously stated.
Paul Grewal, Coinbase’s chief legal officer, also weighed in on the matter, questioning how cryptocurrency firms can be expected to be on “fair notice” when there are unresolved legal questions in court.
This latest development follows the SEC’s initial move to appeal and stay Judge Torres’s decision in August, where they argued there were “substantial grounds for differences of opinion.” Ripple Labs responded on September 1 by filing a memorandum of law opposing the SEC’s request for an appeal, asserting that the SEC lacked substantial grounds for such an appeal.
The cryptocurrency industry watches closely as the legal battle between Ripple Labs and the SEC rages on. The outcome of this case could have far-reaching implications, potentially setting a precedent for how cryptocurrencies are classified and regulated in the United States. Until a resolution is reached, XRP remains in legal limbo, with uncertainty casting a shadow over its future in the crypto market.
