Ripple Labs, the entity behind the Ripple blockchain and the XRP token, has scored yet another win against the U.S. Securities and Exchange Commission (SEC) in its lawsuit against the financial regulator after a federal judge denied its request to appeal a court verdict that was favorable to the company.
Federal judge Analisa Torres of the Southern District of New York had previously ruled in July that XRP was security only when sold to institutional investors and the sale of the token via public exchanges to retail customers did not violate federal securities laws.
Federal Judge Denies SEC’s Appeal Against The Verdict In The Ripple Case
On Wednesday, she stated that the SEC had not pointed out any substantial flaws in her decision. Initially, the Commission had sought to challenge the court’s ruling and now has until after April 2024 to do so.
Judge Torres’s previous ruling was already hailed as a victory within the crypto community, and her latest statement to deny the SEC’s appeal also marked another victory, albeit minor, for Ripple and the Bitcoin and crypto markets.
The SEC and its chairman Gary Gensler have repeatedly argued that all cryptocurrencies other than Bitcoin (BTC) are securities and therefore their regulations must be overseen by the securities watchdog. The Commission used the assertion to bring lawsuits against major players in the crypto sector, including Binance and Coinbase.
The regulator filed a lawsuit against Ripple Labs, its CEO Brad Garlinghouse, and co-founder Chris Larson in December 2020, arguing that the company had raised $1.5 billion in capital by selling unregistered securities in the form of XRP tokens. The legal action led to many prominent crypto exchanges delisting XRP tokens in order to prevent any potential legal complications.
Since Judge Torres ruled in favor of Ripple Labs, several crypto trading platforms have indicated their intent to relist XRP or consider doing so in the near future.
However, the court’s decision is not final, as the SEC still retains the option to appeal the judge’s decision but can only do so after the lawsuit formally concludes in April 2024, following a trial on the remaining issues.
The Commission also took another blow to the face in August when a federal appeals court sided with crypto asset manager Grayscale in its lawsuit against the regulator related to the conversion of its Bitcoin Trust fund into a BTC-focused spot exchange-traded fund (ETF). A panel of judges found that the SEC’s decision to deny Graysacle’s request to list a Bitcoin ETF on the U.S. spot market was “arbitrary and capricious” as the agency could not provide a valid reason for doing so.
The agency has since said it will appeal the decision and has two weeks left to request for rehearing of the case.
New York Judge Says Crypto Tokens Do Fall Under Federal Securities Laws
It was not a total loss for the SEC in its legal battles against crypto firms. In July, federal judge Jed Rakoff of the U.S. District Court of the Southern District of New York sided with the securities regulator in its case involving Terraform Labs’ Terra USD stablecoin. He stated that digital currencies can in fact be considered securities when sold to the general public. This was in contradiction to Judge Torres’s ruling.
At the time, the chief legal officer of Ripple Labs, Stuart Alderoty, tweeted that Rakoff’s ruling would change nothing about the existing court verdict declaring XRP as not a security.
However, both rulings are not a good look for the crypto regulatory environment in the United States. Financial analysts and market experts expect to see more disagreements between courts and less clarity on decisions until the U.S. government takes the initiative to act on the digital asset class.
Judge Toress clarified that her decision does not conflict with Rakoff’s ruling. She has set a trial date of April 23, 2024, for the Ripple Labs case, which puts two options on the table for the SEC; either settle the case with Ripple before the court date or file a motion to appeal the ruling after the trial.
Daniel Stabile, a legal partner with the law firm Winston & Strawn, which is the representative of both Ripple Labs and cryptocurrency exchange Binance, said the victory was yet another example of a court stopping the SEC’s efforts to enforce regulatory action against crypto firms.
Ripple Granted The License To Operate As A Payments Institution In Singapore
To rub salt in the SEC’s wounds, On Wednesday, the Monetary Authority of Singapore (MAS) granted Ripple’s Singapore arms the license to operate as a major payments institution in the city-state.
Soon after the court decision was announced, Ripple (XRP) rose by 5% to trade at $0.54 – a 7.8% increase in price compared to last week. At the time of writing, XRP is trading at $0.52 – dropping 1.8% in the last 24 hours.