The U.S. Securities and Exchange Commission plans to appeal a recent court ruling involving Ripple Labs, which has dealt a setback to the agency’s efforts to regulate the cryptocurrency market.
In a letter Wednesday, the SEC asked Manhattan District Judge Analisa Torres to have a federal appeals court review her July 13 decision, in which she said the sale of Ripple’s XRP digital token on a public exchange complies with federal securities laws.
The SEC said the appeal could resolve legal issues where “substantial differences of opinion exist.”
It also said the outcome of the appeal has “special implications” for its ability to enforce securities laws, as well as a “substantial” number of other lawsuits.
For years, the SEC has claimed that digital assets such as cryptocurrencies are securities like stocks and bonds and have the authority to regulate them.
The company sued Ripple, CEO Brad Garlinghouse, and co-founder and chairman Chris Larsen in December 2020, alleging they illegally raised more than $1.3 billion (nearly Rs 10,758 crore) in an unregistered securities offering through the sale of XRP .
Ripple did not break the law when XRP tokens were sold on public exchanges, Torres said, because buyers had no reasonable expectation of profit from Ripple’s efforts.
However, eighteen days later, U.S. District Judge Jed Rakoff of the same court ruled otherwise, finding that the Terra USD token offered by Terraform Labs qualifies as a security when sold on a public exchange.
Torres’ decision was not an outright victory for Ripple, as she found that Ripple’s sale of XRP to institutional investors violated securities laws.
The judge must decide whether to let the SEC appeal her decision and put the case on hold.
Lawyers for Ripple and Ripple, Garlinghouse and Larsen did not immediately respond to requests for comment.
The SEC, chaired by Gary Gensler, has brought more than 100 enforcement actions against cryptocurrencies, many of which ended in settlements.
Gensler also sought to rein in excessive speculation in the cryptocurrency space, which he said undermined investor trust in U.S. capital markets.
The Ripple and Terraform case does not directly affect the SEC’s lawsuit alleging that Coinbase, the largest cryptocurrency platform in the United States, was operating illegally for failing to register as an exchange.
Binance, the world’s largest cryptocurrency platform, was also sued by the SEC.
© Thomson Reuters 2023
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