The US Securities and Exchange Commission has suggested it may appeal a recent ruling on the Ripple Labs lawsuit, which ruled XRP not a security when sold to retail investors.
The SEC argues that the ruling goes against “fundamental securities law principles” such as the Howey Test, which determines whether or not an investment contracts.
Do we really want a judge to ask himself: Will my strict application of the Howe test in this case result in an outcome in 2023 that is consistent with the policy implications behind the 1934 statute? https://t.co/acMNRc00B6
— John E Deaton (@johndeaton1) 22 July 2023
The SEC’s latest comments on the Ripple Labs lawsuit were made in a separate lawsuit against TerraForm Labs and its founder Do Kwon that allegedly “planned a multi-billion dollar crypto asset securities fraud.”
According to the SEC’s July 21 response to a motion to dismiss from Terraform Labs — in which the potentially precedent-setting Ripple Labs decision was referenced by defendants — the SEC highlighted several issues against the court’s recent ruling on XRP.
“Contrary to Defendants’ claims, the majority of Ripple’s ruling in this matter supports the SEC’s claims and rejects the arguments raised by Defendants here. However, with respect to programmatic and other sales, the SEC respectfully objects that Ripple conflicts with Howe and his offspring and adds unfounded requirements,” the SEC said, adding:
“Respectfully, the wrong decisions were made on those parts of Ripple, and this Court should not uphold them. SEC staff is considering various available avenues for further review and would like to recommend that the SEC seeks such review.
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The SEC’s statements come just days after SEC Chairman Gary Gensler expressed his dismay over the court not recognizing XRP as a security when sold to retail investors.
“We are pleased that the court addressed […] A token is a security for institutional investors […] Retail investors were disappointed in another aspect. We’re still looking into that and considering that,” Gensler said in an interview with Yahoo Finance on July 17.
That same day, Gensler also appeared at the National Press Club to give a speech on artificial intelligence, and was asked whether the court’s ruling represented an urgent need to establish clear regulation for the industry.
However, Gensler failed to provide a specific answer.
The SEC’s argument that a court hasn’t followed Howe is richer… On its website, the SEC acknowledges that Fed courts require parity and then says it doesn’t require parity in its analysis or doesn’t see parity as a separate part of Howe. If the SEC’s… https://t.co/CX6Kwfh3cJ
— exlawyer.eth/tez (@exlawyernft) 22 July 2023
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