Major Update on the Ripple v SEC Lawsuit: November 1

The United States Court of Appeal for the Second Circuit has mandated that the U.S. Securities and Exchange Commission (SEC) submit its principal appeal brief against Ripple Labs by January 15, 2025. This decision follows the SEC's request for an extension to meet this deadline.

• The SEC had previously missed its submission deadline, prompting defense attorney James K. Filan to reveal the agency's official petition for a delay. The court's ruling on November 1 confirmed the extension but warned that failure to file by the new deadline would result in the dismissal of the appeal.

Background of the Legal Battle

This ongoing legal conflict arose from a pivotal ruling in 2023 by Judge Analisa Torres, which determined that the sales of Ripple’s XRP token on exchanges did not constitute investment contracts under the Howey Test.

• However, the judge did impose a $125 million fine on Ripple for institutional sales of XRP, which she classified as violations of securities laws. In response, the SEC announced its intention to appeal parts of this ruling, filing a pre-argument statement on October 17 that outlined various issues for contestation, including Ripple's programmatic sales of XRP and personal sales by executives Brad Garlinghouse and Christian Larsen.

Ripple's Cross-Appeal

In retaliation to the SEC's appeal, Ripple has filed a cross-appeal targeting specific aspects of Judge Torres's ruling.

• This cross-appeal highlights four key issues, particularly focusing on the definition of “investment contract” as per the Securities Act of 1933. Ripple argues that such a contract necessitates a formal agreement with post-sale obligations and profit guarantees, which they claim do not apply to their XRP transactions.

• Furthermore, Ripple challenges the “fair notice” doctrine, asserting that the SEC and other regulators failed to provide clear guidance regarding the status of cryptocurrencies under federal law. Ripple maintains that it endeavored to inform XRP buyers about the existing regulatory uncertainties.

Ongoing Legal Proceedings

The Ripple v SEC case has stretched over four years and has faced numerous delays, leading to frustration within the XRP community. The upcoming months will be critical as both parties prepare their arguments for the appeal process.