Ripple Labs has submitted a Form C filing as part of its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC). The filing outlines the grounds for Ripple’s appeal of a previous ruling by the Southern District of New York, challenging the court’s application of the Howey test to XRP’s institutional sales.
Revisiting the Howey Test and Legal Dispute
Ripple is requesting the appeals court to conduct a “de novo” review, which calls for a fresh examination of how the law was applied in the original decision. The company argues that the district court misapplied the Howey test—a legal standard used to determine whether a transaction qualifies as an investment contract and thus a security. Specifically, Ripple contests the classification of its direct XRP sales to institutional investors as securities transactions.
Additionally, Ripple claims it lacked fair notice regarding the applicability of securities laws. The company says the SEC’s guidance was inconsistent and vague, making it impossible for Ripple to comply with regulations.
Ripple is also asking the appeals court to reconsider the essential ingredients required for a transaction to qualify as an investment contract and to reassess the scope of the SEC’s injunction against the company.
Ripple’s Legal Officer Comments on Appeal Process
Stuart Alderoty, Ripple’s Chief Legal Officer, highlighted that the appeals court will be reviewing the existing legal record without new evidence from the SEC.
“The Appeals Court reviews the record that has already been set … and we have a great record,” Alderoty said on X. “The SEC can’t submit new evidence or ask us to produce more. There won’t be all the drama we had in the litigation.”
Alderoty also emphasized that XRP was cleared as a non-security in certain contexts, a key element not being challenged by the SEC in this phase of the appeal.
SEC’s Response and Broader Legal Context
The SEC has filed its own pre-argument statement, arguing that the district court erred in its ruling by granting Ripple a partial victory. The agency seeks a re-evaluation of the decision regarding programmatic XRP sales—those conducted through trading platforms, which the court previously ruled were not securities transactions.
The legal dispute between Ripple and the SEC began in 2020, when the SEC alleged that Ripple raised $1.3 billion through the sale of XRP without proper registration as a security.
In July 2023, U.S. District Judge Analisa Torres ruled in favor of Ripple regarding programmatic sales but concluded that direct institutional sales did violate securities laws. Ripple was subsequently ordered to pay $125 million in fines, significantly lower than the $2 billion initially sought by the SEC.
Looking Ahead
Ripple’s latest filing underscores its intent to push back against regulatory ambiguity. Alderoty hinted at a broader strategy behind the SEC’s actions, stating, “The SEC is trying to create distraction and confusion for Ripple and the industry, but it’s just background noise now. The hard part is behind us.”
The appeals court’s final decision could have significant implications for the regulatory landscape surrounding cryptocurrencies and the application of securities laws in the U.S.
