‘The SEC has officially submitted an appeal against Ripple to the U.S. Court of Appeals for the Second Circuit, challenging the August 7, 2024 ruling. Ripple CEO Brad Garlinghouse criticized the SEC for harming its credibility and prolonging the battle instead of protecting investors.
The legal battle has been ongoing since the SEC accused Ripple of selling unregistered securities through XRP. Despite a partial victory for Ripple earlier, the SEC’s decision to appeal has sparked criticism from the crypto community and caused XRP’s price to drop over 10%.
When a frustrated user suggested that Ripple should sue the SEC, describing them as a “Rogue Agency,” Marc Fagel, a former SEC lawyer humorously replied, calling it “a Rouge Agency, or at least a little pinkish.” However, he clarified that Ripple, having been found to have raised over $700 million through an unregistered securities offering, is not in a strong position to sue the SEC.
A user inquired whether Ripple could continue its business through secondary market XRP sales without issues following the appeal and if the SEC is still focused solely on Ripple’s direct sales. Marc responded by noting that the SEC is likely challenging the court’s decision, which ruled that sales through intermediaries were not considered securities. Unless that decision is overturned, Ripple can continue selling through secondary markets, but the court’s ruling applied only to historical practices, not current ones.
Another user asked Marc about the possibility of Ripple appealing on the grounds that On-Demand Liquidity (ODL) transactions do not satisfy the Howey Test, particularly regarding the expectation of profit. Marc responded, saying that Ripple can, and likely will, file a cross-appeal on this issue.
He said that it’s a harder call to make, as his initial expectation was that the court would find most sales violated Section 5 but carve out ODL transactions, which seemed more aligned with the legal framework. However, he noted that this is just his opinion, shared by many securities lawyers who remain quiet on the matter.
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