key takeaways:
- SEC files motion for court review of Ripple Labs’ XRP token sales decision.
- SEC questions XRP’s classification as a non-security, citing complex legal issues and the Howey test.
In a recent court filing, the SEC submitted a reply memorandum supporting its motion for an interlocutory appeal in the ongoing legal battle with Ripple. James Filan, a prominent defense lawyer, criticized the SEC’s argument that Judge Torres should stay the proceedings to conserve judicial resources as “laughable.“
The SEC referred to the Programmatic Sales issue as a “complex legal problem” in the filing. Notably, the SEC cited the SEC v. Terraform Labs case, where Judge Rakoff criticized Judge Torres’ ruling. The SEC argued that the Defendants had no “institutional interest in the efficient resolution of this case.”
The regulator also pointed to other high-profile cases involving crypto companies, like Terraform Labs, to claim there were “substantial grounds for difference of opinion” on how securities laws apply to digital assets.
Ripple opposed the SEC’s request, contending that there were no “extraordinary circumstances” justifying a departure from the rule that requires resolving all issues before an appeal.
The SEC, after signaling its intent to appeal Judge Analisa Torres’ ruling in the U.S. District Court for the Southern District of New York last month and obtaining permission, faced a September 1 deadline for Ripple to present its opposition. Friday’s filing is the SEC’s response to Ripple’s opposition memo.
In July, Judge Torres ruled that Ripple violated federal securities law in its sale of XRP to institutional investors but not with retail investors. This ruling contrasted with another judgment by Judge Jed Rakoff, also from the same court, in a separate SEC case. The SEC cited these discrepancies in its initial memo and in Friday’s filing as part of its effort to persuade Judge Torres to allow the interlocutory appeal, which permits an appellate court to address certain legal questions while the case continues in the original court.
Request for Interlocutory Appeal :
The SEC’s call for an interlocutory appeal in this case is notable due to its industry-wide implications. The SEC contends that this case fits the profile for such an appeal, as recognized by the Second Circuit.
Gary Gensler, the SEC Chair, has consistently expressed skepticism regarding the need for new crypto regulations. He maintains that the existing SEC guidelines are sufficient for the diverse range of cryptocurrencies, often categorizing most of them as securities.
Stuart Alderoty, Ripple’s Chief Legal Officer, criticized the SEC’s recent filing as “inconsistent” on Twitter, questioning the agency’s previous assertions about regulatory clarity. Similarly, Paul Grewal, Coinbase’s legal head, raised doubts about the concept of “fair notice” in the midst of these intricate legal debates.
