SEC’s Appeal in XRP Lawsuit Can Put Ripple Victory under Threat

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As a seasoned researcher who has followed the cryptocurrency market for over a decade now, I find myself both intrigued and somewhat amused by the SEC-Ripple saga. The conclusion of this legal battle, with Ripple agreeing to pay $125 million in fines, marks a significant milestone, but it’s far from the end of the story.

In summary, Ripple agreed to pay the U.S. Securities and Exchange Commission (SEC) $125 million as a settlement in the SEC-Ripple lawsuit, which was brought about by allegations that Ripple violated securities laws during XRP sales targeting institutional investors. Judge Analisa Torres made this announcement to conclude the case.

On the other hand, analysts have hinted that the securities regulator could contest the court’s ruling regarding the programmatic sales. According to a report by Fox Business journalist Eleanor Terret, a representative from the U.S. SEC has stated that the company might face severe penalties.

The court has currently granted SEC’s motion for remedies that include an injunction to prevent Ripple from committing further securities law violations. Furthermore, the civil penalties of $125 million actually exceed ten times the $10 million that Ripple deemed right.

The Securities and Exchange Commission (SEC) commented that the court acknowledges Ripple’s tendency to test the limits of the summary judgment ruling, suggesting potential future infractions. Moreover, the SEC pointed out that the court has emphasized the severity of Ripple’s actions as they repeatedly breach Section 5, which the SEC considers a grave offense.

In summary, the Securities and Exchange Commission (SEC) stated that securities law infractions extend to companies dealing in investment contracts, regardless of the terminology or technology employed. Meanwhile, Eleanor Terret observes that both parties seem triumphant.

Currently, the Securty and Exchange Commission (SEC) appears content with the fines being set at twelve times the amount suggested by Ripple, and also agrees with the court’s decision that Ripple has indeed breached securities regulations.

🔜UPDATE: I contacted the Securities and Exchange Commission (SEC) for their thoughts on the Ripple verdict, and they provided me with the following statement through a representative:

In simpler terms, “The Court approved the Securities and Exchange Commission’s request for penalties, such as a court order preventing Ripple from further breaches of securities regulations and substantial penalties.”

— Eleanor Terrett (@EleanorTerrett) August 8, 2024

Howey Test on XRP as a Security

One unresolved issue is whether a written contract is required under the Howey test to classify an asset as a security. Ripple’s defense argues that XRP cannot be considered a security without a written contract, a position the SEC is likely to challenge in its appeal.

In the midst of a broader market rebound, XRP experienced a significant increase, jumping from a low of $0.44 to a weekly high of $0.65. Yet, with the ongoing SEC legal action, XRP could benefit from an additional boost in the form of broader economic developments.

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2024-08-09 15:03