The SEC hints at appealing the ruling in the Ripple Labs case regarding XRP’s classification as a security, citing conflicts with securities laws principles, potentially impacting the crypto industry’s regulatory landscape.
The United States Securities and Exchange Commission (SEC) has indicated that it may appeal the ruling in its case against Ripple Labs, which pertains to the classification of XRP as a security in a recent development. The ruling in question had declared that XRP was not a security when sold to retail investors.
The SEC’s argument centers around the violation of “fundamental securities laws principles,” particularly the Howey test, which determines whether an investment contract exists.
This revelation came to light during a separate lawsuit involving Terraform Labs and its founder, Do Kwon. The SEC’s response to a motion to dismiss from Terraform Labs referenced the Ripple Labs ruling, and in doing so, highlighted several issues it holds against the court’s decision on XRP.
While the SEC acknowledged that the Ripple ruling supported some aspects of their claims against Terraform Labs, they maintained that it conflicted with and added “baseless requirements” to the Howey test regarding the Programmatic and other sales. As a result, the SEC expressed its disagreement with certain portions of the Ripple ruling and disclosed that they are considering various avenues for further review, with an intention to recommend such a review to the SEC.
The recent comments by the SEC follow its Chair Gary Gensler’s expression of disappointment over the court’s decision to classify XRP differently for institutional and retail investors. Gensler made his views clear during a July 17 interview with Yahoo Finance, stating that they were still evaluating the matter.
Gensler also addressed the issue of regulatory clarity for the crypto industry during a talk on artificial intelligence at the National Press Club on the same day. It raises questions about whether the court rulings have created an urgent need for establishing clear regulations in the crypto space.
As the SEC contemplates its next steps in the Ripple Labs case, the crypto community awaits further updates to understand the potential implications on XRP’s regulatory status and the broader cryptocurrency market. Investors and industry stakeholders will be keeping a close eye on any developments that may arise from the SEC’s considerations, as it could have significant ramifications for the crypto landscape.