The United States Securities and Exchange Commission (SEC) is considering the possibility of appealing a recent ruling in the case against Ripple Labs, which determined that XRP (XRP) is not classified as a security when sold to retail investors.
The SEC is arguing that this ruling contradicts “fundamental securities laws principles,” including the Howey test, which is used to ascertain if something falls under the category of an investment contract.
The recent comments from the SEC on the Ripple Labs lawsuit were made during a separate lawsuit involving Terraform Labs and its founder, Do Kwon, who are accused of orchestrating a multi-billion dollar crypto asset securities fraud.
In response to a motion to dismiss from Terraform Labs, where the Ripple Labs ruling was referenced by the defendants, the SEC pointed out various issues it has with the court’s decision on XRP.
The SEC acknowledged that parts of the Ripple ruling support its claims in the Terraform Labs case but disagreed with the aspects related to the Programmatic and other sales.
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The SEC stated that these portions of the Ripple ruling were wrongly decided, and it does not want the court to follow them.
The SEC staff is considering available options for further review and intends to recommend that the SEC seek such review.
The SEC Chair, Gary Gensler, expressed disappointment over the court’s classification of XRP as not being a security when sold to retail investors.
He mentioned that while the court recognized XRP as a security for institutional investors, he was unhappy with the ruling regarding retail investors. The SEC is still evaluating the matter.
In a talk on artificial intelligence, Gensler was questioned about the need for clear regulations in the industry, to which he did not provide a specific answer.
It’s worth noting that the SEC’s stance on the Howey test has been questioned, as the agency’s own website has acknowledged that federal courts require commonality, but the SEC itself does not view commonality as a distinct part of Howey in its analysis.
In conclusion, the SEC is considering the possibility of appealing the ruling that XRP is not a security when sold to retail investors, arguing that it conflicts with established securities laws principles.
The agency’s statements come in the wake of its disappointment with the court’s decision and raise questions about the need for clearer regulations in the industry.
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