SEC Responds to Ripple Filing, Doubles Down on Appeal Bid

The Securities and Exchange Commission pushed back Friday against Ripple Labs’ efforts to block its appeal of a judge’s ruling that largely favored the cryptocurrency company in its legal fight with the regulator.

In the new court filing, the SEC argued that the summary judgment by U.S. District Judge Analisa Torres in July raised “precisely the kinds of ‘knotty legal problems'” that warrant interlocutory—or provisional—review by a federal appeals court under a law that allowed certain rulings to be appealed before a case concludes.

The SEC is seeking to challenge Torres’ findings that Ripple’s programmatic and institutional sales of the digital token XRP were not securities offerings requiring registration with the regulator. The judge ruled that only certain institutional sales Ripple made under investment contracts were unregistered securities trades.

“The crux of [Ripple’s] argument is that appeal under Section 1292(b) is not available because the issues for appeal require applying law to undisputed facts in the record and because an appeal would not terminate the litigation,” the SEC said. “Not so.”

The regulator argued that case law allows appeals courts to review district judges’ applications of legal tests like the one used to determine whether something is a security. It also rejected Ripple’s contention that a provisional appeal must completely end a case to be allowed.

“Interlocutory appeal is the path that reaches that goal most efficiently,” the SEC said, predicting its proposed appeal now would hasten the case’s conclusion versus Ripple’s preferred course of further pretrial litigation in district court before any appeal.

In its filing last week, Ripple said that the issues the SEC wants to appeal are “fact-bound” and inappropriate for provisional review. It also argued an immediate appeal would not speed up the case’s resolution.

“The SEC fails to establish any of the three conditions required for certification of an interlocutory appeal. This court should follow the Second Circuit’s instruction that the use of [the law] ‘must be strictly limited to the precise conditions stated in the law,’ and deny the SEC’s request for certification,” Ripple wrote.

The company added: “That is all the SEC purports to do here. The SEC’s contention that this court reached the wrong result in applying Howey to the facts of this case does not show any difference of opinion about an underlying legal rule warranting certification.”

The SEC sued Ripple and two of its executives in December 2020, alleging they raised over $1.3 billion by illegally selling XRP as an unregistered security. Both sides moved for summary judgment this year after discovery concluded.