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Attorneys for the Securities and Exchange Commission (SEC) provided a sneak peek at a potential appeal regarding some aspects of the recent split decision in the SEC’s case against Ripple Labs in a Friday filing to Judge Jed Rakoff of the U.S. District Court for the Southern District of New York.
The SEC lawyers argued, “Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them.” These comments were made in connection with the agency’s case against Terraform Labs and its former CEO, Do Kwon.
The lawyers reported that the SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review.
The filing indicates a probable appeal regarding the portion of the Ripple decision that concluded that “blind bid” or “programmatic” sales of XRP to third parties did not fully meet the criteria of a securities offering. The lawyers stated that they would not request that the judge disregard the ruling if they did not anticipate a decision to appeal from the commission, which needs to vote on litigation matters.
The Ripple decision was issued by a different judge in the same court as the Terraform and Do Kwon cases, and it would be considered a precedent relevant to the case unless the SEC chooses to appeal the decision.
XRP Sales: Ripple Decision Impact on Terraform and Kwon’s Case
Lawyers representing Terraform and Kwon brought the part of the Ripple decision that contradicted the SEC’s claim that XRP sales were illegal securities offerings into their already-ongoing civil enforcement case. In a filing on Tuesday, they argued that their case should be dismissed based on the Ripple decision, which they deemed “fatal” to the SEC’s argument against them.
The SEC has put forth similar arguments, asserting that the sales of those tokens were unlawful. However, they have also accused Terraform and Kwon of outright fraud totaling $40 billion, a claim that was not made in the Ripple case.
Nonetheless, the SEC lawyers have indicated their intent to challenge the portion of the Ripple decision that ruled against them if the bipartisan commission approves an appeal, which seems likely.
In the ongoing Terraform proceedings, SEC lawyers assert that the judge in the Ripple case accurately determined that the defendants’ public statements about XRP led institutional buyers to expect profits from Ripple’s efforts. However, the lawyers contend that the same reasoning should apply to retail buyers as well. They criticize Ripple for creating an artificial distinction between the expectations of institutional and retail investors, which they believe deviates from the reasoning underlying Howey and other relevant cases.
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