- Crypto lawyers say exchanges like Coinbase and Binance could use the XRP ruling to boost their court battles with the commission.
- Coinbase has already deployed the XRP ruling in its court battle with the SEC.
- The regulator sued Ripple in 2020, saying the company profited off sales of the XRP token, while failing to register it as a security.
The Securities and Exchange Commission says its appeal against Ripple Labs should be resolved quickly as it has implications for other ongoing lawsuits.
“Timely appellate review is particularly warranted given the number of actions currently pending that may be affected by how the Court of Appeals resolves these issues,” the commission said in a letter filed with a federal court this week.
It’s a sign the case will be a precedent-setter for other crypto securities litigation, deciding the SEC’s assertion that most crypto tokens are securities. The regulator has wielded this dictum to sue multiple crypto businesses, including two of the US’s biggest exchanges, Coinbase and Binance.
Crypto lawyers told DL News that exchanges like Coinbase and Binance could use the XRP ruling to boost their court battles with the commission.
Coinbase, indeed, cited the ruling repeatedly in a request for the dismissal of the SEC’s case against it, filed in early August.
The SEC sued Ripple in 2020, alleging that the company and its executives profited off sales of the XRP token, while failing to register it as a security.
In mid-July, Judge Analisa Torres handed down a partial ruling in the Ripple case. While sales of XRP did not qualify as the sale of securities when sold to the public via exchanges, sales of the token were sometimes illegal when sold to institutional investors.
The SEC now wants to appeal that part of the ruling that found that “programmatic” sales of the token — those on exchanges — were legal transactions.
The appeal is known as an interlocutory appeal — an appeal made on an aspect of a case that is still ongoing. That’s because Torres’ ruling on XRP’s status as a token was only part of what she had to decide.
The next part of the trial will focus on the other aspect — whether or not Ripple’s CEO Brad Garlinghouse and executive chairman Chris Larsen engaged in unlawful offerings of XRP, and if they aided and abetted certain regulatory violations by Ripple.
That will be decided by a jury trial, and Torres has scheduled it for the second quarter of of 2024.
US lawyers say interlocutory appeals are very unusual, as courts tend to want parties in lawsuits to wait till a final judgement is made. Torres will have to approve the SEC’s request to appeal.
The lawyers said a key part of Torres’ reasoning in her decision that programmatic sales of XRP were legal was the notion that crypto exchanges facilitate blind transactions, where buyers and sellers don’t know each others’ identities on a mediated platform.
Coinbase argued this point in its motion to dismiss, saying the SEC charged the exchange based on blind spot transactions — “the very sort of transactions the Ripple court recently held as a matter of law were not investment contracts because the undisputed facts showed not relevant relationship between the parties to the sale.”
The lawyers stressed, however, that while opinions like Torres’ can be helpful arguments before other courts, they aren’t binding on those courts.
A mid-July ruling in a separate SEC lawsuit, this one against Terraform Labs, explicitly rejected Torres’ logic in her XRP decision.
To share tips or information about Ripple or another story, please contact me at firstname.lastname@example.org.