Regulation

Ripple CLO Breaks Down Next Steps In US SEC vs XRP Appeal

Published

2 months ago

October 15, 2024

Ripple Labs Chief Legal Officer (CLO) Stuart Alderoty has shared the developments of next steps that are to be taken in the ongoing lawsuit between Ripple and the United States Securities and Exchange Commission (SEC).

This case was filed in 2020 and focuses on the characterization of the XRP as a security, and whether Ripple conducted the sales of this token without registering them under the laws of the United States. As the legal fight enters the appeals stage, the firm and the US SEC prepare for a drawn-out process that could extend into 2026.

Ripple CLO Breaks Down Next Steps In US SEC vs XRP

Alderoty outlined the next stages of the appeal process at the agency’s annual Swell conference, explaining the basis of the agency’s appeal and Ripple’s cross-appeal. Stuart Alderoty said that the SEC has to file Form C, indicating what it wants to prosecute, by October 16, 2024.

In two weeks, the firm will file its own Form C, which will present the company’s cross-appeal. The company has said that it plans to challenge the specific provisions of the original decision that held that certain institutional XRP sales constituted unregistered securities transactions.

After presenting Form Cs, the parties will then schedule when they will brief. The first brief by the US SEC is due in 90 days, and the commission is expected to present its legal points. Stuart Alderoty noted that the agency is expected to take the full 90 days, which means that the SEC’s first brief submission will be due mid-January 2025. The company will then file its response, followed by its own brief. This process, which includes several cycles of briefing and reply, is expected to continue until the middle of 2025.

Confidence in the Second Circuit

However, Stuart Alderoty was optimistic that the company is on stronger legal ground given the long time frame. In his speech at the Swell conference and other interviews, he said that Ripple is even more confident in its position in the U.S. Court of Appeals for the Second Circuit than it was in the Southern District of New York.

”We think this appeal will blow up in the SEC’s face,” Alderoty said, noting that the majority of the appeals in the Second Circuit do not lead to reversals of the district court’s decisions, but rather affirmations of such decisions.

He pointed out that the SEC’s attempt to seek clarification through this appeal could positively impact the whole cryptocurrency space as the ruling will set a legal precedence.

Ripple’s Cross-Appeal Focuses on Institutional Sales

Ripple’s cross-appeal will only be on the part of the judgment of Judge Analisa Torres where she found that institutional sales of XRP by the company were a violation of the securities laws. While Judge Torres ruled that retail sales of XRP did not constitute unregistered securities offerings, she ruled against Ripple on institutional sales.

The company will argue that these institutional sales did not involve “investment contracts” because they lacked specific rights and obligations, a key legal factor in determining whether a financial product is a security under U.S. law.

Alderoty explained that the firm is aiming for a legal precedent that clarifies this distinction. “We think that’s a fundamental rule of law that needs to be recognized,” he said, noting that trial courts have been reluctant to go that far in their interpretations. Nevertheless, the Ripple CLO acknowledged that the Second Circuit’s ruling could bring much-needed clarity, regardless of which side prevails.

In addition to its ongoing legal battle with the SEC, the company continues expanding its operations globally. At the Swell event, the firm also discussed the launch of its new stablecoin, RLUSD, a dollar-denominated token designed to enable faster and cheaper cross-border payments. The stablecoin is set to be issued under New York’s strict regulatory framework, which could give it an advantage in regulatory compliance, especially in an environment where other stablecoins face increased scrutiny.