The soap opera between the US Securities and Exchange Commission (SEC) and Ripple Labs has gained another exciting chapter. The regulator filed an appeal on January 15 against Judge Analisa Torres’ July 2023 ruling that handed Ripple a partial victory. The SEC’s recent move has reignited debate in the cryptocurrency community over the classification of XRP.
The SEC has accused Ripple of selling XRP as unregistered securities in violation of U.S. federal law. Last July’s ruling provided some relief for Ripple, but the SEC, showing that it is not willing to budge, filed an appeal yesterday, focused primarily on whether or not the sales of XRP to retail investors qualify as unregistered securities transactions.
Using the famous Howey Test as a basis, the SEC argued in the lawsuit that Ripple’s marketing and promotion actions created in investors a certain expectation of profit, which, according to the test, would characterize XRP as an investment contract. In other words, the SEC believes that Ripple sold a promise of financial return, which would fit the definition of a security.
This fight has been going on for quite some time and has generated a lot of discussion in the cryptocurrency market. Whether or not XRP is classified as a security has huge implications for Ripple and the entire crypto ecosystem. If XRP is considered a security, it means that it will be subject to much stricter regulation, which could impact its adoption and value. On the other hand, if Ripple wins this battle, it could set an important precedent for other cryptocurrencies.
It is worth remembering that the SEC’s lawsuit began in 2020 when it accused Ripple of trading XRP as an unregistered security. In 2024, the company was ordered to pay a $125 million fine, significantly less than the $2 billion originally demanded by the commission.
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Ripple
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XRP