The Ripple-SEC legal saga took the cryptosphere by storm, with the court ruling last month sparking further speculations and debate. Ripple was ordered to shell out $125 million for breaking securities laws in institutional sale transactions.
As the dust settles, a former attorney at the Securities and Exchange Commission has predicted that the agency is likely to challenge certain aspects of the case, setting the stage for yet another lengthy legal fight.
SEC Believes XRP Ruling Was Wrong
Given that the U.S. Securities and Exchange Commission (SEC) previously tried and failed to file an appeal in the Ripple lawsuit before Judge Torres’ final judgment in August, speculation is rife on whether the Wall Street regulator might likely again attempt to appeal the ruling, including the issue of XRP secondary sales.
In a Sept. 27 post, Fox Business reporter Eleanor Terrett revealed that a lawyer who recently left the SEC thinks the agency will “probably” lodge an appeal. The potential appeal would be centered around the landmark ruling in July 2023, where Judge Analisa Torres declared that XRP was not a security but only when sold to retail investors. At the same time, Torres found that XRP was still a security when sold to institutional investors.
The unnamed lawyer revealed that “everyone” at the Commission is convinced that the Torres’ decision was wrong.
“Everyone over there [at the SEC] truly believes that the decision is wrong, that it’s not good law, and should be appealed.”
It is worth noting that the agency has until Oct. 7 to appeal. Ripple’s legal head, Stuart Alderoty, earlier stated that he would not be surprised by an SEC appeal. However, he is certain that the cross-border token’s legal status will not be impacted as this is “the law of the land.”
An SEC Appeal Would Be A Waste Of Taxpayer Money: Pro-XRP Lawyer
The rumors of a potential appeal have prompted a reaction from the lawyer who waded into the SEC tussle with the Ripple, John Deaton. Deaton noted in a detailed X post that the agency may leverage the infamous Howey test as an argument to appeal the XRP judgment.
In Deaton’s opinion, the judge didn’t apply all three factors of the Howey test. Specifically, he thinks Judge Torres did not apply the third prong, i.e., common enterprises. As such, the attorney, who is vying against crypto skeptic Sen. Elizabeth Warren in the Massachusetts Senate race, believes the SEC could use this to appeal in the case, but it won’t make a huge difference.
“The common enterprise factor was, in my opinion, the weakest part of the SEC’s case against Ripple. Thus, even if the 2nd Circuit ruled Judge Torres erred applying the 3rd prong, the SEC doesn’t win the case,” Deaton explained. “The case would go back to Judge Torres for her to apply the common enterprise prong and she would likely rule the SEC didn’t establish a common enterprise.”
The prominent pro-XRP attorney added that if the SEC appealed, it would lose again and then have to file another appeal. In other words, the SEC’s possible appeal would only prolong the lawsuit, further wasting taxpayers’ money.
“It makes no sense and would be a total waste of taxpayer money to appeal this decision, which is why someone like Gary Gensler might just appeal.”