Ripple Challenges Regulatory Uncertainty in Crypto, Files Appeal in Case Against SEC

Ripple Labs has filed a cross-appeal in the U.S. Court of Appeals for the Second Circuit, contesting several elements of a key ruling in its legal battle with the Securities and Exchange Commission. 

The move comes a week after the SEC submitted its own appeal, targeting specific aspects of a 2023 court decision that partially favored Ripple in its sale of XRP to investors.

The appeals process, which is expected to continue well into next year, has already drawn significant attention due to its potential impact on the regulation of digital assets in the U.S.

“The Appeals Court reviews the record that has already been set and we have a great record,” Stuart Alderoty, Ripple’s chief legal officer, said in a Thursday statement on X.

“The SEC can’t submit new evidence or ask us to produce more. Meaning, there won’t be all the drama we had in the litigation when we fought over documents,” he added.

Ripple’s filing, dated Thursday, outlines four critical issues that the company plans to address. 

Central to the firm’s appeal is the argument its institutional XRP sales should not have been classified as unregistered securities offerings, which resulted in a $125 million fine. 

Ripple contends that the U.S. Southern District Court of New York, under Judge Analisa Torres, misapplied the definition of an “investment contract” in relation to the 1933 Securities Act. 

Specifically, the company disputes the requirement that such a contract must impose post-sale obligations on the seller and give buyers a right to profit from the seller’s efforts.

Additionally, Ripple argues that the court overlooked the broader regulatory uncertainty surrounding how securities laws apply to crypto.

The company claims the SEC failed to provide fair notice that XRP’s sale would violate these laws, raising a significant legal question about the application of securities regulations to digital assets.

The regulator, meanwhile, is appealing the dismissal of charges related to Ripple’s programmatic XRP sales on digital exchanges and its distributions to employees, which it claims violated those laws. 

The regulator is focusing on whether Ripple’s executives, Brad Garlinghouse and Chris Larsen, violated securities laws by offering what it deems as unregistered sales.

Notably, the SEC has not challenged the district court’s finding that XRP itself is not a security, a ruling that remains a significant victory for Ripple.