The U.S. Securities and Exchange Commission (SEC) has officially filed an appeal in its ongoing legal dispute with Ripple Labs, challenging a July 2023 ruling that partially dismissed its claims against the company.
The appeal, filed late Wednesday, centers on whether Ripple’s sales of XRP to retail investors qualify as unregistered securities transactions under federal law. Referring to the Howey Test, the SEC argues that Ripple’s promotional efforts created an expectation of profits among investors, making XRP an investment contract.
Although the SEC first filed its appeal in mid-October 2024, this Wednesday’s opening brief marks a formal step in the appellate process, where the SEC presents its arguments to contest the court’s previous decision. The agency disputes the district court’s ruling that sales on crypto exchanges did not meet the standard, stressing that investor expectations depend on the issuer’s actions, not the identity of the seller.
The brief also takes issue with the lower court’s decision to exclude XRP distributed in non-cash transactions, such as employee compensation and business incentives, from securities laws. The SEC argues that labor and services received in exchange for XRP meet the “investment of money” criterion outlined in the Howey framework.
Ripple’s legal team has consistently countered the SEC’s claims, maintaining that XRP is a digital currency, not a security. On Wednesday, Ripple’s Chief Legal Officer Stuart Alderoty referred to the SEC’s latest filing as a “rehash of failed arguments,” predicting that the case would lose momentum under a Trump administration.
The outcome of the appeal could have significant implications for the crypto industry, as stakeholders view the case as a key indicator for regulatory clarity on digital asset classifications. A reversal of the decision could empower the SEC to pursue similar cases, while a defeat could limit its enforcement authority.
The dispute, which began in late 2020, has drawn considerable attention from investors and lawmakers. Ripple has framed the SEC’s enforcement actions as a barrier to innovation and a part of the broader debate on the future of U.S. crypto regulation. A resolution in the appeals court is not expected until later this year.
