SEC files Ripple appeal, cites ‘conflicts’ with Supreme Court precedent

Hold your horses, the battle between the Securities and Exchange Commission and Ripple isn’t quite over yet.

Yesterday, the SEC filed to appeal the $125 million judgment in its case against Ripple. 

The case, which is now as old as a human toddler — with its four-year anniversary coming up in December — has been a long and hard-fought court case between the two parties.

Both the SEC and Ripple had until Oct. 7 to decide if they were going to pursue an appeal. 

An SEC spokesperson told Blockworks that it filed the appeal because it believes the decision “conflicts with decades of Supreme Court precedent and securities laws.” 

Read more: SEC’s enforcement director announces departure 

While there are a lot of unknowns about what the appeal will look like, one thing’s for certain: The appeal will not only draw out the process, but also could have some implications beyond just Ripple and the SEC.

It could, for example, dampen the hopes for a potential Bitwise XRP ETF. The firm filed its registration statement for a potential ETF on Wednesday. Galaxy Digital’s Alex Thorn warned that the likelihood of success from Bitwise “drops to near zero” with an appeal.

Ripple and the SEC both notched wins and suffered some losses throughout the years. 

In July of last year, Judge Torres handed the two parties the biggest decision yet: Ripple’s programmatic sales of XRP didn’t constitute investment contracts. However, the double-edged sword was that Torres ruled the institutional sales did.

“The vast majority of individuals who purchased XRP from digital asset exchanges did not invest their money in Ripple at all. An Institutional Buyer knowingly purchased XRP directly from Ripple pursuant to a contract, but the economic reality is that a Programmatic Buyer stood in the same shoes as a secondary market purchaser who did not know to whom or what it was paying its money,” she wrote at the time. 

At the time, the SEC sought to file an interlocutory appeal on the decision but was later denied. 

And now we’re here. It’s not a huge surprise that the SEC would appeal. After all, they didn’t necessarily win on the final judgment. Though, one could also argue that Ripple didn’t either. And lawyers we spoke to after the decision said they wouldn’t be surprised if an appeal was filed.

Basically, the SEC sought an eye-watering sum of $2 billion in the final judgment. Ripple, on the other hand, wanted a far lower sum of $10 million. In the end, Torres announced that Ripple would pay $125 million. It’s fair to say the sum falls closer to what Ripple wanted rather than the multi-billion dollar sum the SEC wanted.

Ripple’s Chief Legal Officer Stuart Alderoty was also not surprised, calling the appeal filing “disappointing.” 

“The Court already rejected the SEC’s suggestion that Ripple acted recklessly, and there were no allegations of fraud and, of course, there were no victims or losses,” he added. 

CEO Brad Garlinghouse reiterated that Ripple will continue to fight. He didn’t mince words about the appeal. 

“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,” Garlinghouse said. “Somehow, they still haven’t gotten the message: They lost on everything that matters. Ripple, the crypto industry, and the rule of law have already prevailed.”

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