The US Securities and Exchange Commission (SEC) has taken a significant step in its ongoing lawsuit against Ripple Labs, urging the court to grant its motion for an appeal. The lawsuit revolves around whether XRP tokens should be considered securities when sold to retail investors. The SEC argues that the court's application of the law, especially concerning the Howey test, presents complex legal issues that merit review. In its filing on September 8, the SEC requested that the US District Court for the Southern District of New York grant its interlocutory appeal motion and halt further proceedings until the appeal is resolved.
In July, Judge Analisa Torres ruled that XRP generally does not meet the SEC's criteria for securities, especially when distributed through programmatic sales, such as those occurring on exchanges for retail investors. The SEC's latest contend filings that this ruling on programmatic sales and other distribution methods raise substantial legal questions. It argues that these issues create a legal gray area, particularly regarding whether specific cryptocurrencies should be categorized as investment contracts under the Howey test, citing conflicting legal conclusions in various district court opinions.
The SEC acknowledges that interlocutory appeals should be the exception rather than the rule but asserts that this case is unusual due to its industry-wide significance and the unique consequences it carries. This request for an appeal marks a change in tone from previous statements made by the agency and its chairman, Gary Gensler, who has asserted that the SEC's existing guidelines are comprehensive enough to cover the cryptocurrency market adequately.
Ripple's Chief Legal Officer, Stuart Alderoty, criticized the SEC's filing as "disingenuous" in a tweet and questioned the need to address these "thorny legal issues" after years of the SEC's leadership insisting that the rules are clear. Coinbase's Chief Legal Officer, Paul Grewal, also raised concerns about how cryptocurrency companies can receive fair notice when faced with unresolved legal matters.
The SEC initially appealed Judge Torres' decision in August, citing a significant difference of opinion. In response, Ripple Labs filed a legal memorandum of objections on September 1, asserting that the SEC's request for an appeal was insufficient.
