SEC Reply Brief Filing and US Securities Laws
After the Ripple reply brief filing related to the Motion to Strike, the SEC must file a reply brief to a Ripple opposition brief by May 6. The briefs relate to the SEC opening brief, where the SEC argued for the court to deliver a punitive penalty and an injunction for breaching US Securities Laws.
The SEC argued that Ripple continued to breach US Securities Laws after the December 2020 complaint (post-complaint).
In the opposition brief, Ripple stated it limited post-complaint XRP sales to ODL transactions. The ODL contracts protect buyers from losses and prevent profits. Moreover, Ripple argued it ensured its institutional investors qualified as accredited investors. Sales to accredited investors are exempt from US securities laws.
While the ruling on the Motion to Strike warrants investor attention, the outcome of the Ripple case will have more significance. A punitive disgorgement and an injunction prohibiting Ripple from selling XRP to US institutional investors could impact XRP.
However, SEC plans to appeal against the Programmatic Sales of XRP ruling remains the focal point. In July 2023, Judge Analisa Torres ruled that programmatic sales of XRP do not satisfy the third prong of the Howey Test. Another court ruling, classifying crypto as a security, would give the SEC more justification to regulate the crypto market.
In December, Judge Rakoff ruled Terraform Labs and Do Kwon failed to register Luna and TerraUSD as securities. In March, Judge Failla denied the Coinbase (COIN) Motion to Dismiss (MTD) charges for operating as an unregistered securities exchange. Coinbase filed a Motion to seek an interlocutory appeal against the ruling.