The United States Securities and Exchange Commission (SEC) is contemplating an appeal after a recent ruling declared XRP, the cryptocurrency developed by Ripple Labs, not to be a security when sold to retail investors. The regulatory body believes that the ruling contradicts fundamental principles of securities laws, including the well-known Howey test, which is used to determine whether an investment contract exists.
The SEC’s stance on the matter was disclosed during a separate lawsuit brought against Terraform Labs and its founder, Do Kwon, which accuses them of orchestrating a multi-billion dollar crypto asset securities fraud.
In response to a motion to dismiss filed by Terraform Labs on July 21, wherein the ruling on XRP was cited as potentially precedent-setting, the SEC highlighted several objections it holds against the court’s recent decision.
“Contrary to Defendants’ assertions, much of the Ripple ruling supports the SEC’s claims in this case and rejects arguments Defendants have raised here. However, with respect to the Programmatic and other sales, the SEC respectfully avers that Ripple conflicts with and adds baseless requirements to Howey and its progeny,” the SEC stated, while also expressing disagreement with certain aspects of the Ripple case.
The SEC further added, “Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them. SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review.”
The Ripple Labs lawsuit has garnered significant attention within the cryptocurrency community, as it holds potential implications for how cryptocurrencies are classified and regulated in the United States. The Howey test has long been a key factor in determining whether a particular investment falls under the category of a security, and any divergence from its principles could significantly impact the regulatory landscape for digital assets.
As the SEC mulls over the possibility of an appeal, the crypto industry and investors alike are closely monitoring the developments in this case. Ripple Labs, a company well-known for its innovative blockchain technology and cryptocurrency solutions, maintains that XRP is not a security and should not be subject to securities regulations. On the other hand, the SEC has expressed concerns over potential risks posed to retail investors and the need for comprehensive investor protection in the evolving crypto space.
For now, the outcome of the SEC’s considerations remains uncertain, but one thing is clear: the ruling on XRP has set the stage for a critical legal battle that could redefine the regulatory landscape for cryptocurrencies in the United States.
