The United States Securities and Exchange Commission (SEC) has taken action to appeal a pivotal ruling in the ongoing Ripple Labs lawsuit. The ruling had previously determined that the XRP token was not classified as a security when sold to retail investors.
The SEC’s filing emphasized the presence of complex legal issues related to the court’s application of the Howey test, prompting the agency to request a thorough review of the case.
As revealed in a filing dated September 8, the commission has petitioned the U.S. District Court for the Southern District of New York to grant its motion for an interlocutory appeal and, in the interim, “stay further proceedings until the resolution of that appeal.”
In their request, the commission stated that they respectfully requests certification for appellate review now because the issues raised by the Court’s order on summary judgment (‘Order’) present precisely the kinds of ‘knotty legal problems’ that led Congress to provide for interlocutory review.
SEC’s Interlocutory Appeal Raises Questions About XRP’s Security Status
Notably, Judge Analisa Torres had previously ruled in July that, according to the commission’s guidelines, XRP generally does not qualify as a security, especially when distributed through programmatic sales, such as retail exchanges.
However, in this latest filing, the commission argued that the court’s decisions regarding programmatic sales and other distribution methods give rise to “legal questions” of significant importance, thus justifying the agency’s interlocutory appeal.
The commission highlighted the existing ambiguity in the classification of certain crypto assets under the Howey test, citing contradictory legal conclusions reached in other District cases. The agency stated, “At least two opinions within this District reach contradictory legal conclusions on these issues, and many other courts are considering whether similar offers and sales […] satisfy Howey.”
Furthermore, the SEC pointed out that this situation deviates from previous statements made by the commission’s Chair Gary Gensler, who had previously asserted that the commission’s existing guidelines sufficiently cover the entire crypto market. Gensler has consistently maintained that the majority of crypto assets qualify as securities.
This latest appeal sets the stage for further legal battles and underscores the ongoing uncertainty surrounding the regulatory status of cryptocurrencies, leaving the crypto industry and investors eagerly awaiting the court’s decision on this matter.