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SEC to appeal XRP ruling in Ripple case

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In a letter filed with the court on Wednesday, the U.S. Securities and Exchange Commission (SEC) said it was seeking leave to appeal part of a ruling in its lawsuit against Ripple Labs, as well as to postpone a recently scheduled jury trial on another part of the case.

In July, Judge Analisa Torres of the District Court for the Southern District of New York ruled that Ripple’s sales of XRP to institutional investors violated securities law, but that its programmatic sales to retail investors through exchanges did not. This latter ruling is what the SEC intends to appeal.

“Specifically, the SEC seeks to certify the Court’s holding that Defendants’ “Programmatic” offers and sales to XRP buyers over crypto asset trading platforms and Ripple’s “Other Distributions” in exchange for labor and services did not involve the offer or sale of securities,” said the regulator’s letter.

The SEC also suggested that while the interlocutory appeal is pending, any further proceedings in the case should be ‘stayed’ (postponed), which includes the jury trial of Ripple’s CEO Brad Garlinghouse and Executive Chairman Chris Larsen—tentative dates for which Judge Torres filed on August 9.

SEC v Ripple

In December 2020, the SEC filed suit against Ripple Labs, Bradley Garlinghouse, and 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, the court ruled that the “programmatic sales” of XRP through exchanges and algorithms did not qualify as the sale of securities, one of the reasons being that they lacked “a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”

However, the court did find that institutional sales of XRP amounted to illegal securities based on the Howey test.

“Based on the totality of the circumstances, the Court finds that reasonable investors, situated in the position of the Institutional Buyers, would have purchased XRP with the expectation that they would derive profits from Ripple’s efforts,” said Judge Torres at the time.

As of Wednesday, the SEC has decided to appeal the programmatic sales ruling, which may affect another part of the ongoing case.

Garlinghouse and Larsen jury trial

Judge Torres ordered a trial by jury in July for Garlinghouse and Larsen over whether they are liable for aiding and abetting illegal securities sales to institutional investors who bought XRP.

On Wednesday, Torres filed a tentative schedule seeking to hold the trial in the second calendar quarter of 2024, with both parties given until December 4 this year 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, after the SEC’s request to stay the proceedings, it’s likely Judge Torres’ proposed schedule will be subject to change.

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