By George Ward
A new development has emerged in the long-running legal dispute between the United States Securities and Exchange Commission (SEC) and the blockchain firm Ripple Labs. On July 13, 2023, Analisa Torres, the United States District Court District Judge for the Southern District of New York, issued a verdict that resulted in some victories and losses for both parties involved.
The financial watchdog charged Ripple and its top-level executives, Bradley Garlinghouse and Christian A. Larsen, with improperly distributing and trading unregistered securities (XRP tokens), violating US securities laws.
Mixed Ruling
The court recently granted and denied summary judgment motions from the SEC and Ripple in a mixed ruling. Even though the court agreed with the commission on the issue of institutional sales, it disagreed on other aspects of its lawsuit.
On the other hand, Ripple’s motion has seen the court’s nod on Programmatic Sales, Other Distributions, and transactions involving both of its executives. However, the court disagreed with the firm’s Institutional Sales.
According to the Pretrial Scheduling Order issued on August 9, a jury trial involving Ripple and its executives is temporarily fixed for completion by June 30, 2024. Meanwhile, the SEC filed a motion for interlocutory appeal on August 18, 2023, indicating its intention to seek legal redress regarding the summary judgment by Judge Torres.
However, Ripple Labs filed a solid opposition to this motion on September 1. The blockchain firm’s legal counsel claimed that Judge Torres’ ruling did not present a controlling question of law warranting an interlocutory appeal.
The firm also claimed that the regulator’s “substantial ground for disagreement” was another way to show its displeasure with how the court applied the Howey test to Ripple’s XRP transactions. In response, the commission filed a detailed “Reply Memorandum of Law in Further Support of Motion to Certify Interlocutory Appeal” on September 8, providing a clear counter-argument to Ripple’s stance.
The SEC maintained that the issues raised by the court’s summary judgment order were complex legal issues that necessitated the US Congress to focus on reviewing the interlocutory policy under 28 USC 1292(b).
SEC’s Push For Appeals
Meanwhile, the SEC further argued that the decisions on Programmatic Sales and Other Distributions are legal matters that have resulted in conflicting legal interpretations. To bolster its stance, the SEC cited at least two cases within the district that reached opposing legal conclusions on the same issue, highlighting the case’s complexities and broad industry implications.
Furthermore, the SEC disagreed with Ripple’s claim that an interlocutory appeal would not end the litigation. The agency stated that the court’s application of the Howey test to undisputed facts during summary judgment is reviewable under Section 1292(b), a position supported by both Supreme Court and Second Circuit precedent.
As a result, the SEC accused Ripple of ignoring or misrepresenting these examples. In addition, the SEC contended that Ripple intends to prolong the legal proceedings to continue selling XRP to the public.
The regulator claimed that a stay wouldn’t save the court’s and the parties’ resources, in contrast to Ripple’s claims that an attempt to overturn the current decision would result in a “tremendous waste of resources.” Nevertheless, the court hasn’t fixed a date to evaluate the arguments presented by both parties regarding the motion for interlocutory appeal.
If the court approves the SEC’s appeal, the case will be sent to an appellate court, specifically the United States Court of Appeals for the Second Circuit, to review the legal issues raised. Should the motion be denied, the case will proceed to the tentatively scheduled jury trial between April 1 and June 30, 2024, unless either party presents new developments.
Industry players remain keenly interested in this legal tussle because they believe the court’s decision would impact the future of the digital asset market in the United States.