The ongoing legal saga between Ripple and the U.S. Securities and Exchange Commission (SEC), a new development suggests that the SEC may be preparing to appeal the July 2023 ruling by Judge Analisa Torres regarding Ripple’s programmatic sales of XRP. This insight was shared by FOX Business journalist Eleanor Terrett, who cited a former SEC lawyer as her source.

The Background of the Ruling

In July 2023, Judge Torres ruled that Ripple’s programmatic sales of XRP did not constitute investment contracts, a significant victory for the company. The SEC had initially sought to appeal this decision immediately; however, the judge required that all matters in the case be resolved before any appeal could proceed. With the deadline for a potential appeal set for October 7, speculation is mounting about the SEC’s next steps.

SEC’s Position on the Ruling

According to Terrett, insiders at the SEC believe that Judge Torres made an error in her ruling, which they argue does not align with existing legal standards. As such, there is a strong inclination within the commission to challenge the decision in the U.S. Court of Appeals for the Second Circuit.

Legal Community Reacts

The news has prompted reactions from various legal experts, including John Deaton, a Massachusetts Senate candidate and attorney closely following the Ripple case. Deaton, who played a significant role in supporting Ripple during the legal proceedings, expressed confidence that the Second Circuit would uphold Torres’ ruling.

Insights from John Deaton

Deaton highlighted that for a transaction to be classified as an investment contract under the Howey Test, all three prongs must be satisfied. He noted that Judge Torres focused on the third prong, which examines the “expectation of profits based on the efforts of others.” Deaton pointed out that the evidence presented, including affidavits from 3,800 XRP holders, supports the argument that these holders did not expect profits based on Ripple’s efforts.

He further stated, “Even if the Second Circuit finds that Judge Torres erred in applying the third prong, the SEC would still lose on the second prong—common enterprise.” Deaton argued that this aspect of the SEC’s case was particularly weak and would not be satisfied in the eyes of the court. He concluded, “If that happened, the SEC would lose AGAIN and then have to appeal all over. It makes no sense to appeal this ruling!”

Clarifications on Programmatic vs. Secondary Sales

Legal expert Fred Rispoli also weighed in on the matter, addressing misconceptions about the implications of an appeal. He clarified that the SEC’s loss pertained specifically to Ripple’s programmatic sales and not secondary market transactions.

Rispoli explained that programmatic sales involve Ripple’s XRP transactions on exchanges executed via trading algorithms, while secondary sales refer to transactions made by the public on these exchanges. Since Judge Torres’ decision explicitly excluded secondary sales from the ruling, any potential appeal would not affect this aspect of the market, according to Rispoli.

Upcoming Deadline

As the October 7 deadline approaches, the SEC must file any appeal notices before time runs out. The legal landscape surrounding Ripple and its XRP token remains uncertain, and how the SEC decides to proceed will be closely monitored by stakeholders across the cryptocurrency space.

In summary, as the SEC considers its options following Judge Torres’ ruling, the reactions from legal experts like John Deaton and Fred Rispoli emphasize the potential challenges the SEC may face in an appeal. The outcome of this case continues to hold significant implications for the broader cryptocurrency industry.