SEC says it will appeal partial defeat in case against Ripple Labs

The Securities and Exchange Commission said Wednesday that it planned to challenge a partial defeat in its ongoing case against Ripple Labs, telling the court in the Southern District of New York that it will seek an an interlocutory appeal.

“Interlocutory review is warranted here," it said in a letter to Judge Analisa Torres. "These two issues involve controlling questions of law on which there is substantial ground for differences of opinion, as reflected by an intra-district split that has already developed.”

The agency cited a recent case against Terraform Labs, where a judge rejected Torres’ approach. An SEC official declined to comment when asked if that influenced its appeal. 

Torres ruled last month that some of Ripple’s sales, called programmatic, of XRP did not violate securities laws because of a blind bid process in place for them. She also ruled that other direct sales of the token to institutional investors were securities. 

The SEC is looking to specifically appeal the part of the decision about the programmatic sales as well as “other distributions” that included offers and sales of XRP in exchange for goods and services, an SEC official said in a media briefing.

The SEC also said in its motion that an interlocutory review would "advance the termination of this litigation in an efficient manner by removing the possibility of two remedies phases and two trials."

Going forward

The SEC needs approval from the United States District Court Southern District of New York to appeal, and then from the court of appeals. If both of those things happen, then the SEC would need permission from the Second Circuit which then would look into the interlocutory appeal.

The SEC and Ripple have been embroiled in a legal fight since 2020, when the agency accused Ripple of raising $1.3 billion in 2020 through the sale of XRP, which it says is an unregistered security, while also charging Garlinghouse and Larsen. 

Ripple too could appeal Torres' ruling. The partial victory for the company last month was viewed as a watershed moment for the industry and sent the XRP token surging as much as 80%.

Gary DeWaal, senior counsel at the law firm Katten, said in an email that he expected the SEC to appeal, adding that “it would not be surprising if Ripple makes a similar request in connection with the Court’s decision regarding the Institutional Sales.”

Ripple will file its response with the court next week, said Stuart Alderoty, the firm's chief legal officer in a tweet on Wednesday.  

(Updates with Stuart Alderoty comment)