Former SEC Lawyer Weighs In On Whether Or Not The Regulator Can Appeal XRP’s Non-Security Status

The SEC v. Ripple lawsuit is nearly four years old. Now it’s over. Maybe. This is after Ripple was ordered to pay $125 million for its federal securities violations involving sales of the XRP token to institutional clients.

Speculation of an SEC appeal arose after Ripple requested that 111% of the monetary judgment amount be placed into a bank account until 30 days “after the time to appeal expires or the resolution of any appeal.” This request, which the SEC agreed to, appeared to be laying the groundwork for a potential appeal by the securities regulator.

Former SEC securities lawyer Marc Fagel, who worked at the agency for 16 years, has delved into what a potential appeal might entail.

Appeal Impending?

To quickly recap: The SEC lodged a $1.3 billion lawsuit against Ripple in late 2020, alleging the San Francisco-based blockchain payments firm sold XRP in breach of securities laws. 

In July 2023, Judge Analisa Torres declared that while Ripple had broken securities laws in how it sold XRP directly to institutional customers, the firm hadn’t violated any laws via its sale of XRP to retail clients via exchanges. During the same year, the SEC unsuccessfully tried to file for an interlocutory appeal on portions of this decision, and in October it cleared CEO Brad Garlinghouse and Chairman Chris Larsen of all charges. 

Last month, the judge ruled that Ripple should cough up $125 million in fines and imposed an injunction against breaking the law in the future.

If the SEC chooses to appeal, it’ll have 60 days from the ruling’s publication to file a notice. Some lawyers have suggested an appeal is possible, given the ruling on secondary transactions is a bad precedent for Wall Street’s top cop.

XRP Non-Security Status Unchallenged

While the XRP case so far has been a significant victory for Ripple, an almost certain SEC appeal could mean that the long-awaited regulatory clarity may still be a distant dream.

When asked whether the SEC could possibly appeal XRP’s non-security status, 

former SEC attorney Marc Fagel suggested that the Commission could only appeal over whether the programmatic sales constituted securities sales.

Fagel thinks the court of appeals could answer that question without deciding whether or not XRP qualifies as an unregistered security. He added that this remains a peripheral issue — which explains why it was just dicta in the district court’s opinion.

That being said, Ripple’s legal chief previously predicted that the SEC would have a rocky road if it appeals, given how rarely appeals courts overturn district court judges.

The price of XRP was $0.5363 at the time of publication, having risen roughly 2.4% in the last 24 hours.