Ripple Labs has advanced its case against the U.S. Securities and Exchange Commission (SEC) to the next level by filing a Form C cross-appeal before the U.S. Court of Appeal for Second Circuit.
The appeal challenges the August decision by the U.S. District Court of the Southern District of New York to levy a $125 million fine on Ripple for securities violations due to institutional XRP sales. Ripple's Chief Legal Officer, Stuart Alderoty, further noted that the appeal would not add any new content to the case and would only be within the existing record.
This would reverse the district court's decision to use the Howey test to determine that Ripple's institutional sale of its XRP token is a security. Alderoty stated on X that the SEC is not contesting the earlier ruling that keeps XRP from being categorized as a security, which he considers a legal achievement for Ripple.
The core of Ripple's attraction is disagreement about what constitutes an investment contract and the use of the Howey test, a legal precedent from 1946. Ripple also claimed that the Buyers invested neither money into a common enterprise nor was they entitled to profits from the efforts solely of the promoter, which are elements of the Howey test. Appellantly, the SEC's enforcement practices are also questioned as they allegedly were unclear, depriving Ripple of an opportunity to conform to the rules properly.
The filing also complains that the court's legal claim, which is also an injunction, is too vague, as it directs Ripple to simply "comply with the law." According to Ripple's lawyers, the focus should be on developing a more precise definition of investment contracts that would help avoid excessive regulation and offer more guidance to the crypto sector.
The decision that comes with Ripple's appeal could be monumental to the cryptocurrency sector by restricting SEC operations on digital assets transactions. This case has captured the attention of the cryptocurrency community and potential institutional investors since it may determine the future categorization and legal treatment of cryptocurrencies.
At the same time, the SEC's cross-appeal concerns Ripple programmatic and employee sales of XRP, which a district court judge concluded did not violate federal securities laws. Such investigation integrity is visible through the SEC's continual targeting of Ripple executive duo Brad Garlinghouse and Chris Larsen for helping in unregistered sales of the coin.