Ripple Files Cross-Appeal Against SEC, Challenges Key Legal Interpretations on XRP Sales

Ripple Files Cross-Appeal Against SEC, Challenges Key Legal Interpretations on XRP Sales

Ripple has officially filed a cross-appeal against the U.S. Securities and Exchange Commission, outlined in a document known as Form C, which specifies the issues Ripple plans to challenge in the appellate phase. Stuart Alderoty, Ripple’s Chief Legal Officer, announced the filing on October 25 on X, formerly Twitter, stating that the company had submitted a Civil Appeal Pre-Argument Statement to the U.S. Court of Appeals for the Southern District of New York. The statement delineates the grounds on which Ripple contests the prior judgment concerning institutional sales of XRP tokens.

Form C functions as a preliminary step, identifying key points Ripple will dispute under a “de novo” review standard. This legal standard allows the appellate court to independently re-evaluate the application of law in the prior ruling without deference to previous findings.

Ripple’s cross-appeal arrives just days after the SEC’s own Form C submission on October 18, wherein the regulatory body asked the court to reconsider its stance on XRP token sales through exchanges and individual transactions by Ripple’s CEO Brad Garlinghouse and co-founder Chris Larsen.

Central to Ripple’s appeal is the application of the Howey Test—a legal criterion used to determine if a transaction qualifies as an investment contract—specifically regarding Ripple’s institutional XRP transfers. Ripple asserts that these transfers do not fulfill the Howey requirements, as they do not involve a direct investment with a guaranteed expectation of profits solely from Ripple’s efforts.

Additionally, Ripple’s argument addresses a perceived lack of fair notice, contending that the SEC’s guidance on digital assets has been inconsistent and deliberately ambiguous, leading to regulatory uncertainty.

Ripple also challenges the court’s interpretation of Section 5 of the Securities Act of 1933, arguing that an investment contract should involve explicit post-sale obligations by the seller, giving buyers enforceable rights. This raises the question of whether Ripple’s XRP sales met the standard for establishing a formal investment contract.

Lastly, the appeal questions whether Rule 65 of the Federal Rules of Civil Procedure, which governs injunctions, prohibits an injunction that merely compels compliance with existing laws.

Alderoty remarked that the central issue in this case is not whether XRP itself constitutes a security, as XRP’s status as a security is not legally established. Instead, he believes that the SEC is attempting to “create distraction and confusion” around Ripple’s activities and the broader crypto industry. Alderoty further emphasized that the appellate court would review the established record without requiring new evidence, a process he sees as advantageous for Ripple.

This filing marks a pivotal stage in Ripple’s long-standing legal battle with the SEC, which began when the agency alleged that Ripple’s sale of XRP constituted an unregistered securities offering worth $1.3 billion. As both sides brace for an extended legal standoff, the implications of the appellate court’s decision could significantly impact the regulatory environment for digital assets in the U.S.