This filing comes as XRP, the cryptocurrency at the center of the case, surpassed $3 for the first time since 2018, fueling optimism among its supporters. The SEC is challenging a New York District Court’s 2023 ruling, which stated that XRP, when sold to retail investors, does not qualify as an unregistered security.

SEC Seeks to Overturn Court’s Ruling on XRP

The SEC’s appeal, filed in the Second Circuit Court of Appeals, seeks to overturn Judge Analisa Torres’s decision from July 2023. In her ruling, the judge concluded that XRP transactions involving retail investors were not securities, while institutional sales of XRP were classified as securities. This distinction, according to the SEC, is flawed and should be reconsidered.

The SEC files its opening brief as XRP sprints past the $3 mark. Source: Dropbox

The regulator argues that the judge misinterpreted the law and that XRP’s sales to retail investors should be considered an unregistered securities offering. The SEC also contends that XRP tokens distributed as employee compensation and through business deals should be classified as securities.

Ripple Responds: A “Rehash” of Failed Arguments

Lawyers for Ripple have lashed out at the SEC for pursuing an appeal – what they’ve called an exercise in repeating previously rejected arguments. Stuart Alderoty, Chief Legal Officer at Ripple, emphasized on his social media that the commission’s filing was merely a rehash of prior claims, which he had said had already been lost previously. Brad Garlinghouse, chief executive at the company, also waded in to suggest the appeal would be dropped by the next administration.

According to market experts, the SEC’s appeal brief is a rehash of arguments that have ‘already failed.’ Source: Stuart Alderoty via X

This sentiment is rooted in Ripple’s belief that the appeal is unlikely to change the trajectory of the case, especially with the incoming political shift. Reports suggest that the new administration under President Donald Trump may take a more lenient approach to crypto regulation, possibly freezing ongoing cases like Ripple’s.

The Howey Test and Ripple’s Promotional Efforts

In the filing, the SEC reiterated that Ripple’s promotional activities of XRP were an investment contract as defined by the Howey test—the legal standard to determine if an asset is a security. According to the SEC, retail investors who bought XRP on exchanges would expect to anticipate profit from such purchases due to Ripple’s actions.

However, Ripple has argued that the SEC failed to show sufficient evidence of the actual participation of retail investors in the promotion efforts of Ripple and any promises of such promotion.

Market Reactions and XRP Price Surge

Despite an appeal from the SEC, for the first time since 2018, the market value of XRP has crossed the $3 mark. This is reflected in growing investors’ confidence in the futility of these efforts by the SEC, with many speculating on a possible reversal of the current agency stance into a more amicable one by the new administration, hence an increase in the price of XRP.

Ripple’s XRP was trading at $3.37 as of the time of publication. Source:XRP Liquid Index (XRPLX) via Brave New Coin

Other factors driving the price upwards include positive sentiments in the wide operations of Ripple, which encompasses new deals and adoption of its blockchain technology in financial markets. Most recently, it has been the expansion into DeFi and cross-border payment solutions that have given a fillip to the utility and therefore the appeal of the token.

Ripple’s Cross-Appeal and Potential Outcomes

Ripple also appealed another judgment that saw Judge Torres impose a $125 million civil penalty for those areas the company had lost. In due course of the litigation process, Ripple will file briefs responding to the SEC’s appeal. A decision might come in several months. Oral arguments at the appeals court may still be held ahead of its decision.

The outcome of this appeal is not certain, but it has been an important focus point in the legal battle between the SEC and Ripple-and it will probably set the tone for future regulations regarding digital assets in the US.

The case has continued to stir wide-ranging debate over how digital assets ought to be regulated in the U.S. as more cryptocurrencies and blockchain technology begin to gain broad traction. Lawyers closely watch the case because a positive outcome for Ripple might establish binding case law that will go against the more general cryptocurrency regulation at the SEC. With appeals still in the works, both the cryptocurrency industry and regulators are gearing up for a moment that could prove to be the turning point in how U.S. laws regulate cryptocurrencies.