Ripple Appeals To Contest SEC Ruling Over XRP Classification

Ripple Labs submitted its Form C to the appeals court on Thursday, escalating its legal battle with the U.S. Securities and Exchange Commission (SEC).

This filing is a pre-argument statement that requests the appeals court to apply a “de novo” standard—essentially a re-evaluation of the previous Southern District of New York court’s decision concerning Ripple’s XRP transactions and securities classification.

The appeal questions whether the district court’s use of the Howey test was appropriate for classifying XRP as an investment contract. Specifically, Ripple argues that its XRP sales to institutions shouldn’t be treated as securities transactions, as this would require an “investment of money in a common enterprise with expectations of profit derived solely from the efforts” of Ripple.

Additionally, Ripple challenges the court’s decision on “fair notice,” claiming that the SEC’s inconsistent and ambiguous statements about federal securities law application left Ripple without adequate guidance.

Ripple’s Chief Legal Officer, Stuart Alderoty, clarified on X that the appeal is limited to evidence already presented. He highlighted the lack of new document disputes in this phase, minimizing “drama” in the proceedings. Alderoty reiterated that XRP has been deemed a non-security and highlighted that the SEC is not challenging this aspect.

Ripple’s filing follows an SEC request last week, in which the agency urged the court to reassess the district court’s ruling favoring Ripple on XRP sales through trading platforms.

The SEC’s appeal primarily focuses on claims that Ripple executives Brad Garlinghouse and Chris Larsen violated securities laws by selling XRP and allegedly aiding Ripple’s violations. The appeal seeks to review the court’s rulings on XRP sales on exchanges and personal sales by the executives.

Ripple’s clash with the SEC, which began in 2020, centers on the agency’s initial claims that Ripple raised $1.3 billion through unregistered securities sales of XRP. Although a New York court ruled last year that Ripple’s programmatic XRP sales did not violate securities law, it required Ripple to pay $125 million for direct institutional sales, a figure far lower than the SEC’s proposed $2 billion fine.

In response, Alderoty stated that the SEC’s “distractions” have become “background noise,” adding that the “hard part of the fight” is now in the past.