Ripple Ruling Challenged by SEC, Firm's Legal Officer Dismisses Effort as 'Noise'

Ripple Ruling Challenged by SEC, Firm's Legal Officer Dismisses Effort as 'Noise'

SEC Takes XRP Ruling to Appeals Court

The U.S. Securities and Exchange Commission (SEC) has intensified its legal battle with Ripple by filing an appeal to challenge parts of a district court ruling that categorized XRP sales differently depending on whether they were made to institutional investors or retail participants.

Ripple’s leadership, however, has dismissed the SEC’s move as futile and disconnected from the broader industry’s evolving priorities. In a brief submitted to the U.S. Court of Appeals for the Second Circuit, the SEC argued that the lower court had erred in determining that XRP sales to retail investors on secondary markets did not constitute investment contracts.

The regulatory agency claims Ripple’s public messaging fostered a unified expectation of profit among investors, regardless of the token’s purchase method. Ripple CEO Brad Garlinghouse sharply criticized the appeal, stating:

"One definition of insanity… Doing the same thing over and over and expecting different results. Gensler’s SEC really took this to heart."

The SEC’s argument hinges on its longstanding assertion that Ripple’s promotional efforts consistently positioned XRP as an asset whose value was tied to the company’s success. The appeal also challenges the district court’s decision to exclude non-cash transactions, such as XRP payments to employees and business partners, from securities law considerations.

Ripple’s Response

Ripple’s Chief Legal Officer, Stuart Alderoty, dismissed the SEC’s latest filing as repetitive and politically fragile. “As expected, the SEC’s appeal brief is a rehash of already failed arguments – and likely to be abandoned by the next administration,” he wrote on X (formerly Twitter).

Alderoty added:

“We’ll respond formally in due time. For now, know this: the SEC’s lawsuit is just noise. A new era of pro-innovation regulation is coming, and Ripple is thriving.”

The appeal stems from a prior ruling that found XRP sales to institutional investors violated federal securities laws due to explicit profit expectations linked to Ripple’s operational efforts. However, retail sales on cryptocurrency exchanges were treated differently, a distinction the SEC argues undermines investor protections and conflicts with precedents set by the landmark SEC v. W.J. Howey Co. case.

Industry Implications

As regulatory tensions escalate, the crypto sector is speculating about potential shifts in enforcement priorities under a new administration. President-elect Donald Trump has signaled interest in reevaluating the SEC’s current approach, promising a more innovation-friendly regulatory environment after his inauguration.

Ripple’s executives remain focused on growth despite the protracted legal dispute. The resolution of this case could significantly impact the future classification and regulation of digital assets under U.S. securities law. XRP, meanwhile, has climbed above the $3 threshold, moving closer to its historic peak of $3.40 per unit, achieved seven years ago.