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Legal experts, including former SEC attorneys, believe an appeal is likely, citing concerns about inconsistencies in rulings related to programmatic XRP trading.
Key Notes
The SEC faces a critical decision with just six days left to appeal the July 2023 ruling in the Ripple lawsuit.Some crypto lawyers argue that the SEC risks wasting resources with a higher chance of losing.Critics, including lawmakers, have called out the SEC's enforcement approach to crypto regulation.The US Securities and Exchange Commission (SEC) has just six more days to appeal the XRP lawsuit amid its high-profile ongoing legal battle with blockchain firm Ripple.
Reports suggest that the SEC might challenge the July 2023 ruling by US District Judge Analisa Torres that stated that only some sales of XRP XRP $0.63 24h volatility: -2.4% Market cap: $35.46 B Vol. 24h: $2.09 B violated the securities laws. Later, Ripple also agreed to a $125 million settlement with the securities regulator.
Many view this ruling as a major victory for the crypto industry showing that digital assets do not violate US securities laws, as opposed to SEC’s thinking. Speaking to Fox Business, former SEC lawyers stated that an appeal is likely with the agency not willing to give up its dominance in the crypto industry. Marc Powers, a former SEC enforcement attorney said:
“I believe the SEC will appeal. I would think it would not want to have the programmatic trading analysis stand. It creates inconsistency in rulings by district court judges and in the Second Circuit.”
Another SEC lawyer who preferred to stay anonymous noted that the decision is flawed, legally unsound, and should be appealed. “I believe most securities lawyers, regardless of their stance on crypto, would agree that it wasn’t a widely respected ruling,” noted the lawyer.
On the other hand, the lawyers representing the crypto industry strongly disagree. They believe that the US SEC would be wasting its resources significantly with a greater possibility of losing. Jeremy Hogan, a partner at the law firm Hogan & Hogan said:
“Of course the SEC thinks the opinion is wrong – they were on the losing side. What the SEC should be thinking of right now is whether an appeal furthers its mandate of investor protection and capital formation.”
SEC Faces Criticism on Crypto Regulatory Enforcement
Several US lawmakers have slammed the securities regulator chair Gary Gensler for adopting a regulation through enforcement approach. During the House of Financial Services Committee meeting last week, Gensler was unable to answer some tough questions from the Republican lawmakers.
Hogan explains that since the Ripple case encompasses a broader set of facts and circumstances beyond just programmatic XRP sales, it might not be the best case for the SEC to appeal if its goal is to specifically target those sales.
Marc Fagel, a former SEC attorney said that the regulator should focus on going after top exchanges instead of Ripple.
“Ripple is just a single issuer, while exchanges present a much broader systemic risk to investors, and the legal landscape is much more up in the air. The agency needs to decide what is the best case to go in front of the Second Circuit – is it the Ripple case, or should the SEC hold off for now and wait for an exchange case like Coinbase to appeal, which would have a better chance at putting the secondary sales issue squarely before the court?” he noted.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
