TLDR:
Ripple files Form C appeal challenging SEC’s $125 million fine for institutional XRP sales during appellate proceedings challenging the appellate court’s application of the Howie test and interpretation of investment agreements No new evidence presented The SEC does not challenge its previous ruling that XRP is not a security for programmatic sale This lawsuit specifically focuses on the following points, rather than XRP’s overall security status: , institutional sales classification
Ripple Labs has filed a Form C cross-appeal with the U.S. Court of Appeals for the Second Circuit, challenging a $125 million fine imposed on it for its corporate XRP sales.
Stuart Alderotti, Ripple’s chief legal officer, announced the lawsuit on October 25, 2024, stating that the lawsuit specifically focuses on institutional sales rather than the broad classification of XRP. He emphasized that. The appeal follows an August ruling by the U.S. District Court for the Southern District of New York, which ruled that Ripple’s institutional XRP sales constituted securities transactions.
Today, Ripple filed Form C, listing the issues it plans to raise in its counterclaim. There are a few things to keep in mind as you proceed.
This lawsuit is not about whether XRP itself is a security. XRP is in the unique position of not having clarity (along with BTC)… https://t.co/AmFocAnbPx
— Stuart Alderoty (@s_alderoty) October 25, 2024
The Form C filing outlines four main arguments against the SEC’s position. First, Ripple is challenging the court’s interpretation of its investment agreement under the Securities Act of 1933. The company argues that a legitimate investment contract must include post-sale obligations and give the buyer the right to profit from the seller’s activities, but that element is absent from the XRP sale. they claim.
Second, Ripple is challenging how the court applied the Howie test, a 1946 legal framework used to identify securities transactions. The company disputed the findings related to the “investment of funds” and “general business” criteria, arguing that institutional XRP sales do not meet these requirements.
The appeal also raises a fair notice defense, alleging that the SEC failed to provide clear guidance that would allow Ripple to avoid regulatory violations. Pro-XRP attorney Jeremy Hogan has suggested that success in this regard could influence future SEC enforcement actions.
Ripple is also challenging the court’s injunction requiring the company to “obey the law,” arguing that such broad language lacks the specificity needed for compliance.
The appeal process will proceed as a de novo review, meaning the court will consider legal interpretation without regard to previous conclusions. Importantly, Mr Alderoti confirmed that no new evidence could be introduced at this stage.
Meanwhile, the SEC filed its own appeal, focusing on Ripple’s programmatic XRP sales and distributions to employees. Regulators have expressed concern about the role of Ripple executives Brad Garlinghouse and Chris Larsen in allegedly aiding and abetting unregistered sales.
Despite these legal challenges, Ripple continues to operate its business. Interest in XRP has increased in recent weeks, with asset management companies Bitwise and Canary Capital applying for XRP-backed ETFs.
This case has attracted attention from both the cryptocurrency community and institutional investors, as its outcome could impact the classification of digital assets in the future. The appellate court’s decision will help determine the scope of the SEC’s regulatory authority over virtual currency trading.
The appellate process continues to focus on specific legal issues rather than broad regulatory issues. As the litigation progresses, the parties may rely on the existing case record to argue their case, streamlining the proceedings compared to the earlier trial stages.
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