SEC Seeks to Appeal Ripple Court Ruling to Second Circuit

News | August 10, 2023 By:

The Securities and Exchange Commission (SEC) has notified the court of its intention to file a motion seeking leave to appeal parts of the recent court ruling in its case against Ripple Labs. In a letter to Judge Analisa Torres of the United States District Court for the Southern District of New York, the SEC said it wants to appeal two “adverse liability determinations” from the July court order that granted partial summary judgment to Ripple.

The SEC specifically aims to appeal the court’s findings that Ripple’s “Programmatic” offers and sales of XRP to crypto buyers on digital asset platforms, as well as its “Other Distributions” of XRP in exchange for services, did not involve the offer or sale of securities. The SEC argues these issues involve “controlling questions of law” where substantial disagreement exists, as evidenced by a conflicting ruling in the Terraform Labs case:

“As noted, one court in this District has expressly ‘reject[ed]’ the [Ripple] Order’s approach as to Programmatic Sales, reasoning that ‘Howey makes no such distinction between purchasers’ for purposes of determining whether investors had reasonable expectations of profits from the issuer’s efforts.”

The SEC also contends that interlocutory appeal now would promote efficiency by avoiding duplicative litigation if parts of the judgment were later reversed after trial:

“Allowing the Second Circuit to define the contours of Defendants’ Section 5 liability now means this Court would conduct only a single remedies phase as to each Defendant and all their conduct (‘Institutional,’ ‘Programmatic,’ and ‘Other Distributions’), and no more than one trial.”

In addition to seeking an interlocutory appeal, the SEC has asked the court to stay the ongoing proceedings, including the remedies phase for Ripple’s “Institutional” sales, while its appeal request is pending. The SEC proposed an expedited briefing schedule to allow the court to swiftly rule on its motion. Ripple must still file its response setting out its position on the SEC’s requests.

A copy of the original filing can be found here.