In its pre-argument appeal statement, Ripple lists the four grounds on which it wants to cross-appeal against the SEC.
Two weeks prior, Ripple revealed that its appeal would guarantee that “nothing is left on the table.” Recall that the blockchain giant Ripple lost the case of XRP’s institutional sales, which were considered investment contracts. Following this decision, the federal court fined Ripple $125 million and placed an injunction on its future institutional sales.
However, the payments firm also filed a cross-appeal notice to expressly contest the institutional sales verdict, as the SEC appealed the rulings of programmatic sales and other distributions of XRP that it lost against Ripple.
Ripple Form C Arguments
Ripple listed four issues it plans to bring before the Second Circuit in the appeal according to the document shared by Defense Attorney James K. Filan. The company requested that the Second Circuit conduct a fresh and impartial de novo examination of the issues and not depend on the district court’s ruling.
The first question that Ripple seeks to raise in the Second Circuit is whether the Securities Acts of 1933 need an investment contract to have an actual contract, post-sale duties, and the buyer’s rights to profit from the seller’s efforts.
Second, Ripple seeks to determine whether the district judge erred in ruling that some of its XRP-related transactions meet the three criteria of the SEC’s classic securities test, Howey. These include a monetary commitment in a joint venture, with buyers expecting to profit from the seller’s efforts.
Third, Ripple’s cross-appeal will highlight its fair notice defense. Ripple is specifically concerned whether it generated a genuine dispute of fact when it presented evidence of the SEC’s conflicting instructions and regulatory ambiguity to claim that it lacked fair notice of whether its actions violated federal securities laws.
Finally, Ripple intends to overturn the injunction order so that it does not disrupt its future business activities. Ripple questions whether the Rule 65 requirement prevents the injunction by simply instructing the enjoined party to follow the law.
What is Next for Ripple vs SEC?
Eleanor Terrett, a business journalist for FOX, has described the next phase of the SEC v. Ripple case. The Second Circuit will now issue the briefing scheduling order after Ripple submits the Form C statement. She previously stated that Ripple’s response will be filed once the SEC files its opening appeal brief.
The SEC will then address the concerns once Ripple files its cross-appeal brief. Stuart Alderoty, CLO at Ripple, stated that the briefing may conclude in nine months, in July 2025.
Terrett further claimed that the Second Circuit will compile all pertinent documents, including some district court filings.
Conclusion
Ripple’s cross-appeal against the SEC’s institutional sales ruling marks a significant moment in its long-standing legal battle, as the company pushes back on the court’s application of the Howey test and the SEC’s opaque regulatory stance.
Ripple’s challenge includes four main points: the need for an actual contract to qualify as an investment contract, questioning the application of the Howey criteria, raising its fair notice defense, and attempting to overturn the injunction on future institutional sales.
These arguments showcase Ripple’s broader fight for clarity on crypto regulation, highlighting concerns about inconsistent SEC guidelines and Ripple’s assertion that it lacked fair notice. The upcoming Second Circuit appeal could shape future crypto regulation, particularly on issues of fair notice and contract requirements, which may impact other crypto firms facing similar regulatory scrutiny.
