Ripple Labs files appeal via Form C against recent SEC ruling challenging interpretation of Howey test used to define investment contracts and classifying institutional sales of XRP as securities transactions did.
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Ripple files Form C challenge with SEC over application of securities laws to institutional sales of XRP
Ripple Labs, one of the leading companies in the crypto sector, has taken an important step in its legal battle against the US Securities and Exchange Commission (SEC).
The company did indeed file a Form C with the U.S. Court of Appeals for the Second Circuit, challenging a recent ruling imposing restrictions on institutional sales of its native digital asset, XRP.
This appeal is the latest chapter in a long dispute between Ripple and the SEC. This revolves around the classification of XRP as a security in the case of direct sales to institutional investors.
The dispute stems from an August ruling by the Southern District of New York that fined Ripple $125 million.
The decision determined that the sale of XRP to institutional investors constituted a securities transaction based on the Howey test. This is a factor that has paved the way for potential regulatory implications for the cryptovalute sector as a whole.
However, Ripple believes this classification is incorrect and has decided to appeal.
Ripple’s chief legal officer, Stuart Alderotti, confirmed the news in a post on Platform
De novo review allows the appellate court to reexamine legal interpretations issued by district courts without reference to previous conclusions.
This kind of review could be decisive for Ripple. They hope to obtain an overturn of the judgment and establish an important legal precedent in the field of cryptocurrencies.
Alderoti also expressed optimism about Ripple’s strategy. Specifically, the SEC states that it “may not introduce new evidence or require Ripple to submit further evidence.”
This means that the case will be retried based solely on previously submitted documents and arguments. This could reduce the scope for SEC intervention and simplify Ripple’s legal process.
Disputes regarding the application of the Howey test
“The SEC’s strategy of distraction for Ripple and the sector as a whole is now just background noise,” Alderoti said.
This statement reflects Ripple’s intention to remain firm against the SEC’s interpretation and protect its business. These are perceived as arbitrary and harmful to the crypto industry.
One of the central points of Ripple’s appeal concerns the challenges of applying the Howie test. That is, it is the legal standard used in the United States to determine whether a transaction is considered an investment contract.
Therefore, it is subject to securities laws. The Howey test provides that a transaction is considered an investment contract. This is the case when you invest money in a common business with the expectation of profiting from the efforts of others.
Ripple claims that the use of this test is not appropriate for institutional sales of XRP. Therefore, we object to the application of this standard to unique cases.
According to Ripple, the interpretation of the Howie test should be updated to better reflect the nature of cryptocurrencies and how they are used in modern markets.
Ripple’s appeal comes on the heels of another appeal filed by the same SEC. On October 16, the SEC requested reconsideration of the district court’s partial summary judgment decision.
This established that programmatic sales of XRP on digital asset exchanges do not constitute securities.
Although the SEC did not dispute this portion of the ruling, it did raise further arguments confirming that XRP is classified as a security in the context of institutional sales.
This highlights the complexity of this case, which involves distinguishing between broad-based programmatic sales and direct sales to accredited investors.
Cryptocurrency World’s Definitive Decision in Ripple vs. SEC Case
The case between Ripple and the SEC has become one of the most-watched cases in the crypto space, given its potential impact on the overall crypto market.
The appellate court’s decision establishes an important precedent and could influence how cryptocurrencies are future classified and regulated in the United States.
If the court rules in Ripple’s favor, the company will not only score an important victory for itself. However, it could also help establish a clearer and less restrictive regulatory framework for cryptocurrencies.
The battle goes beyond legal aspects, raising questions about how the United States intends to regulate the cryptocurrency sector compared to other international jurisdictions.
While the SEC continues to adopt a strict approach, some countries, such as the United Kingdom and Singapore, are choosing more flexible regulatory strategies and embracing innovation. Therefore, we aim to promote the development of the crypto sector.
Ripple and other players in the U.S. crypto market believe clearer, less punitive regulations could attract more investment and stimulate innovation.
Meanwhile, Ripple’s lawsuit continues to be at the center of legal and regulatory debate.
The next step in the process will determine whether the appellate court will accept Ripple’s request to reconsider the case. Additionally, it will determine whether such a review could lead to a final ruling that could have industry-wide implications.
The case involves complex issues such as the definition of digital assets and the application of securities laws, and will continue to capture the attention of both legal experts and the international crypto community.
