Ripple CLO Breaks Down Next Steps in US SEC vs XRP Appeal
February 2024
Ripple Labs Chief Legal Officer (CLO) Stuart Alderoty has shared the developments of next steps that are to be taken in the ongoing lawsuit between Ripple and the United States Securities and Exchange Commission (SEC). This case was filed in 2020 and focuses on the characterization of the XRP as a security, and whether Ripple conducted the sales of this token without registering them under the laws of the United States. As the legal fight enters the appeals stage, the firm and the US SEC prepare for a drawn-out process that could extend into 2026.
A Look at the Appeal Process
Alderoty outlined the next stages of the appeal process at the agency’s annual Swell conference, explaining the basis of the agency’s appeal and Ripple’s cross-appeal. According to him, the SEC has to file Form C, indicating what it wants to prosecute, by October 16, 2024. In two weeks, the firm will file its own Form C, which will present the company’s cross-appeal. The company has said that it plans to challenge the specific provisions of the original decision that held that certain institutional XRP sales constituted unregistered securities transactions.
After presenting Form Cs, the parties will then schedule when they will brief. The first brief by the US SEC is due in 90 days, and the commission is expected to present its legal points. Alderoty noted that the agency is expected to take the full 90 days, which means that the SEC’s first brief submission will be due mid-January 2025. The company will then file its response, followed by its own brief. This process, which includes several cycles of briefing and reply, is expected to continue until the middle of 2025.
Confidence in the Second Circuit
However, Alderoty was optimistic that the company is on stronger legal ground given the long time frame. In his speech at the Swell conference and other interviews, he said that Ripple is even more confident in its position in the U.S. Court of Appeals for the Second Circuit than it was in the Southern District of New York.
"We think this appeal will blow up in the SEC’s face," Alderoty said, noting that the majority of appeals in the Second Circuit do not lead to reversals of the district court’s decisions, but rather affirmations of such decisions. He pointed out that the SEC’s attempt to seek clarification through this appeal could positively impact the whole cryptocurrency space as the ruling will set a legal precedent.
Ripple’s Cross-Appeal Focuses on Institutional Sales
Ripple’s cross-appeal will only be on the part of the judgment of Judge Analisa Torres where she found that institutional sales of XRP by the company were a violation of the securities laws. While Judge Torres ruled that retail sales of XRP did not constitute unregistered securities offerings, she ruled against Ripple on institutional sales.
The company will argue that these institutional sales did not involve "investment contracts" because they lacked specific rights and obligations, a key legal factor in determining whether a financial product is a security under U.S. law. Alderoty explained that the firm is aiming for a legal precedent that clarifies this distinction. "We think that’s a fundamental rule of law that needs to be recognized," he said, noting that trial courts have been reluctant to go that far in their interpretations.
Conclusion
In conclusion, Ripple is preparing to take its case to the Second Circuit Court of Appeals, presenting its case in the hope of challenging the SEC’s representation of XRP as a security. The company is confident in its position, citing the lengthy legal process and the high rate of affirmations in the Second Circuit.
FAQs
Q: What is the current status of the case?
The case is currently in the appeals stage, with the SEC set to file a brief by October 16, 2024.
Q: What is the purpose of the cross-appeal?
The cross-appeal is to challenge the specific provisions of the original decision that held certain institutional XRP sales to be unregistered securities transactions.
Q: What is the expected outcome of the appeal?
The expected outcome is an affirmation of the district court’s decision by the Second Circuit Court of Appeals.
Q: Is Ripple confident in its position?
Yes, Ripple is confident in its position, citing the lengthy legal process and the high rate of affirmations in the Second Circuit.
Q: What is the next step after the appeal?
After the appeal, the parties will schedule a series of briefings and replies, with the first brief by the SEC due in 90 days.
