The XRP lawsuit is not over yet! The SEC requests the appellate court to "revoke" the favorable ruling for Ripple.

In response to the US District Court's ruling in 2023 that 'Ripple's sale of XRP to retail investors does not violate securities laws,' the US Securities and Exchange Commission (SEC) formally submitted an appeal statement on Wednesday, following its appeal filed in October last year.

The U.S. SEC stated in a filing on Wednesday evening that it disagrees with the view of the previously issued judgment by the U.S. Southern District Court of New York and therefore requests the U.S. Second Circuit Court of Appeals to "vacate" the judgment of the district court. The SEC stated:

The court of first instance reasoned that institutional investors expected to profit from the efforts of others, because Ripple demonstrated its efforts to increase the price of XRP.

However, the local court made an incorrect ruling that retail investors do not have the same expectations because they purchase Ripple coins through a cryptocurrency trading platform, so they do not know whether the seller is Ripple, Ripple affiliated companies, or others.

In 2020, the SEC sued Ripple Labs for raising $1.3 billion through the sale of XRP, claiming that 'XRP is an unregistered security'.

In 2023, Judge Analisa Torres of the Southern District Court of New York ruled that the sale of Ripple's XRP (this part sold through a programmatic blind bid process) did not violate securities laws because this part involved a blind bid process where the buyer and seller are unknown. However, the judge also determined that the direct sale of XRP to institutional investors is considered a security, and ordered Ripple to pay a fine of $125 million.

Then in October 2024, the SEC appealed the case, arguing that the district court's decision contradicted decades of Supreme Court precedents and securities law.

The SEC often refers to the "Howey Test" to determine whether a transaction constitutes an investment contract and should therefore be subject to securities law. According to the SEC, when making a monetary investment in a common enterprise with the reasonable expectation of profits derived from the efforts of others, there is an "investment contract".

The SEC argued in this case that Ripple has been trying to boost demand for XRP through public statements, "thereby increasing the price of XRP." The SEC said:

These statements will lead institutional investors who have purchased Ripple coins from Ripple and even all Ripple coin investors to reasonably expect to profit from Ripple's efforts to boost Ripple coin prices. These statements can be accessed by both retail investors and institutional investors on Ripple's website, social platforms, and news reports.

The initial lawsuit against Ripple Labs was initiated during the tenure of SEC Chairman Jay Clayton, appointed by Trump, and continues under the leadership of current Chairman Gary Gensler.

Jay Clayton has already indicated that he will step down as SEC chairman on January 20, the day of Trump's inauguration as president. It is currently unclear how the SEC will handle this lawsuit in the future. Trump has nominated former SEC commissioner Paul Atkins, who supports cryptocurrencies, to succeed Jay Clayton as SEC chairman.

Ripple's General Counsel Stuart Alderoty described the SEC lawsuit as just noise, believing that the case will be resolved during the next administration.

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The Ripple lawsuit is not over yet! SEC requests appeals court to 'revoke' the favorable ruling for Ripple. This article was first published in 'Blocklike'.