In two letters filed with a federal judge on August 16, Ripple Labs and the other defendants in a Securities and Exchange Commission (SEC) lawsuit opposed the regulator’s expected appeal against a partial ruling in the case from July.
The defendants’ attorneys appealed to the court to reject what they described as the SEC’s “gambit” to have the partial ruling overturned.
“Having failed to meet its burden to present facts that would support stretching Howey to cover all of the Defendants’ distributions of the digital asset XRP, the SEC now does an about-face and rushes to appeal what it claims…is a purely ‘legal question’ affecting all other digital-asset cases,” the letter read.
The SEC is suing Ripple Labs, along with CEO Bradley Garlinghouse and Executive Chairman Christian Larsen, accusing them of engaging in illegal securities offerings from 2013 up to the present, based on the sale of digital assets XRP.
In July, Judge Analisa Torres ruled on summary judgment motions from both parties, which are applications brought during proceedings if one party believes it has an overwhelmingly strong case. As it happened, both parties in the Ripple-SEC case believed they had strong enough cases to apply for an early judgment.
In a partial victory for each party, Torres ruled that institutional sales of XRP amounted to illegal securities based on the Howey test, but that “programmatic sales” of XRP through exchanges and algorithms did not, due to the lack of “a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”
On August 4, in a letter to Judge Torres, the SEC indicated that it intended to file an interlocutory appeal to the latter part of this ruling, with the regulator maintaining that “programmatic sales” do amount to securities offerings.
The reason it would be an ‘interlocutory’ appeal is because there are still parts of the trial ongoing.
Separate from the summary judgment orders, in July, Judge Torres ordered a trial by jury for Garlinghouse and Larsen over whether they are liable for aiding and abetting illegal securities sales to institutional investors who bought XRP.
On August 4, Torres filed a tentative schedule seeking to hold the trial in the second calendar quarter of 2024, with both parties given until December 4, 2023, to submit any motions ‘in limine’—which is a motion made to the court before a jury has been selected, to request the exclusion or inclusion of certain testimony or evidence.
However, the SEC requested to delay this unresolved part of the case until after its appeal.
In a separate letter to the court, also filed on Wednesday, the lawyers for Garlinghouse and Larsen wrote in support of the Ripple Labs letter and to oppose the SEC’s motion for a stay in the outstanding proceedings.
“The SEC can appeal the Court’s decision in the normal course after a final judgment with a full record,” stated the letter.
If Judge Torres allows the SEC to file its appeal officially, the schedule of Garlinghouse and Larsen’s jury trial will almost certainly be affected, whether it’s stayed or not.
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