The United States Securities and Exchange Commission (SEC) has filed an appeal in its ongoing lawsuit against Ripple Labs, which originally began in December 2020. On October 2, the SEC moved to challenge a key part of the previous ruling in the case.
The appeal follows the 2023 decision by Judge Analisa Torres, who ruled that secondary sales of Ripple’s XRP token did not qualify as securities transactions. This ruling was seen as a major win for Ripple and the wider cryptocurrency community.
Judge Torres based her decision on the SEC’s “Howey Test,” which determines whether a financial asset qualifies as a security. She concluded that XRP itself did not meet all the requirements to be classified as an investment contract. As a result, secondary market sales of XRP were ruled not to be unregistered securities.
However, the court did decide that the initial sales of XRP made directly by Ripple’s founders to institutional investors did meet the criteria for securities sales. This distinction was due to the way those sales were structured and marketed.
At the time of the ruling, the decision was celebrated as a significant step forward for Ripple and the broader crypto industry, as it provided more clarity on the regulatory status of digital assets. The SEC’s appeal now seeks to challenge that ruling.
Summary Review: The SEC’s latest move signals its ongoing determination to regulate digital assets under existing securities laws, which could have far-reaching implications for Ripple and other cryptocurrency projects.
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