Ripple v. SEC update as of September 4, 2023

The cryptocurrency industry is gearing up for the second phase of the legal battle between the United States Securities and Exchange Commission (SEC) and blockchain firm Ripple. Indeed, Ripple continues to enjoy a partial victory in the matter after the court initially ruled that XRP was a security.

Last week, the stage for the second battle was set after Ripple opposed the SEC’s intention to appeal the decision. As revealed by defense attorney James Filan on September 1 in a post on X (formerly Twitter), the blockchain firm believes that the SEC has not met all the requirements to warrant an appeal in the matter.

“The SEC has not even attempted to meet the standard for a stay, even after the Individual Defendants identified that omission in their pre-motion letter,” said Ripple. 

Ripple pointed out that the summary judgment did not tackle the legal grounds for the interlocutory appeal. Their objection was based on the assertion that the SEC had deviated from the established legal standpoint, particularly concerning applying the Howey test to XRP token sales.

In August, the SEC contended that there were significant differences of opinion on the applicable laws, providing substantial grounds for their appeal. 

Possible path to settling

Amidst speculation surrounding a potential resolution in the case, John Deaton, a pro-XRP lawyer representing numerous XRP token holders, in an X post on September 2, outlined the potential courses of action the two parties may pursue if they choose to settle.

Deaton emphasized the importance of the ongoing legal battle between Coinbase and the SEC. He explained that should the judge presiding over the Coinbase case grant the exchange’s motion to dismiss, it would signify that token sale on the platform are not subject to U.S. securities laws. However, he clarified that this ruling wouldn’t extend to cover cryptocurrency staking activities.

“The only way Ripple and the SEC (could) settle before the end of the year is if Judge Failla grants the Coinbase motion to dismiss or partially grants it – finding token sales on an exchange in a blind bid/ask transaction do not fall under U.S. securities laws,” he said. 

In this case, if the motion to dismiss is granted, it would significantly limit the SEC’s capacity to initiate an appeal, rendering a settlement a plausible course of action. Notably, the SEC has already informed the court of its availability for trial in Q2 2024.

Deaton further clarified that the agency’s jurisdiction and influence would be significantly curtailed even if an appeal were feasible under such circumstances.

Impact of SEC court performance 

It is worth noting that the SEC’s performance in other crypto cases is being reviewed as a possible projection of the agency’s outcome in the Ripple case. As reported by Finbold, Ripple’s Chief Legal Officer, Stuart Alderoty, pointed out that the SEC was getting battered in court, which is likely to set a precedent for other crypto cases involving the regulator. 

This comes after an appeals court ordered the SEC to review its rejection of Grayscale’s spot Bitcoin Exchange-Traded Fund (ETF) bid. Based on the agency’s performance, Ripple CEO Brad Garlinghouse has labeled the SEC as being ‘out of control.’

In the meantime, XRP has regained the $0.50 level, making minor gains of less than 0.1% in the last 24 hours.