NAIROBI (CoinChapter.com) — Ripple Labs is pushing back against the U.S. Securities and Exchange Commission (SEC) in a high-stakes legal battle over XRP’s classification.
On Oct. 24, the blockchain company submitted a Civil Appeal Pre-Argument Statement excluding the abbreviation of Form C, asserting that the SEC’s approach to categorizing XRP as an “investment contract” is wrong. The issues on which Ripple sought to appeal concerns and the present demand explain four fundamental issues to the Second Circuit Court of Appeals.
Ripple Challenges SEC’s Use of ‘Investment Contract’ Definition
A key issue in Ripple’s appeal challenges the SEC’s broad application of “investment contract” under the 1933 Securities Act.
Ripple argues that a transaction should only be considered an investment contract if it involves a binding agreement, imposing obligations on the seller and granting buyers the right to profit from the seller’s activities.
The company further contends that the SEC’s reliance on the Howey Test—a legal precedent from 1946—overlooks the unique characteristics of digital assets like XRP, which don’t fit traditional investment models.
Ripple’s appeal also revisits its “fair notice” defense, which alleged that the SEC didn’t provide adequate guidance on whether its XRP sales breached federal securities laws, creating widespread confusion within the crypto industry.
Another focus of Ripple’s appeal is the SEC’s injunction, which broadly requires Ripple to “obey the law” without clear guidelines.
Pro-XRP attorney Jeremy Hogan noted that such vague orders could disrupt Ripple’s operations by leaving compliance open to interpretation. Hogan suggested that a Ripple victory here could limit the SEC’s ability to impose similar broad mandates, especially on digital asset firms.
SEC’s Extension Request Draws Criticism
Meanwhile, Ripple’s case has encountered further delays, with the SEC requesting an extension to submit its opening brief, now set for Jan. 15, 2025. Legal analysts speculated that the agency’s delay might reflect its lack of confidence in overturning the district court’s decision.
Attorney Bill Morgan criticized the SEC’s timing, suggesting the agency could be stalling until the next crypto market downturn. Former SEC lawyer Marc Fagel, however, defended the extension as typical for cases involving multiple levels of review.
Ripple CEO Brad Garlinghouse expressed optimism about the appeal’s outcome, describing SEC Chair Gary Gensler’s regulatory approach as a “reign of terror.” Garlinghouse told Bloomberg he remains confident Ripple is on “the right side of history,” underscoring the broader impact this case could have on U.S. crypto regulation.
In a parallel development, the SEC has requested that the deadline for filing its principal brief be set for January 15, 2025. Additionally, pro-XRP attorney John E. Deaton filed for an appearance as amicus counsel in the Second Circuit rendition. He told FOX Business journalist Eleanor Terrett, “Senate race or not, I don’t walk away from what I started.”
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