Popular legal expert James Murphy says Ripple could agree that the SEC’s interlocutory appeal request is appropriate.
James Murphy, popularly known as MetaLawMan, has highlighted a few options Ripple could adopt in responding to the SEC’s appeal request.
It is worth noting that Ripple is expected to respond to the SEC’s request on or before August 16, 2023. As reported yesterday, Ripple’s chief legal officer Stuart Alderoty said the company would file its response by next week.
Ripple Could Agree With SEC
In anticipation of Ripple’s reply, MetaLawMan said the blockchain company could agree with the SEC that an interlocutory appeal is appropriate.
SEC/Ripple, Interlocutory Appeal analysis
This post will address what I see as Ripple's options in responding to the SEC's request to Judge Torres for certification of an interlocutory appeal.
Option 1: Oppose the motion to certify the appeal.
Ripple could say that the… https://t.co/cMVhARiR79
— MetaLawMan (@MetaLawMan) August 10, 2023
The legal expert noted that he would not be surprised if Ripple chose this option.
While agreeing to the request, MetaLawMan said Ripple could add that the ruling on institutional sales of XRP should also be certified for a cross-appeal.
It bears mentioning that the court declared Ripple’s past direct sales of XRP to institutional investors as investment contracts. There are still pending issues against Brad Garlinghouse and Chris Larsen, who allegedly aided and abetted Ripple in selling XRP to institutional investors.
Notably, the court recently scheduled a jury trial for the pending issue. Per MetaLawMan, if the Second Circuit reverses the SEC’s win on institutional sales, then there would be no need for a trial or a penalty phase.
Ripple May Oppose SEC’s Request
Furthermore, MetaLawMan said Ripple could choose to oppose the SEC’s interlocutory appeal request. In this scenario, MetaLawMan said Ripple could argue that Judge Analisa Torres got it right in the summary judgment decision.
The company may add that an interlocutory appeal could be a waste of time for everyone due to the possibility of another appeal coming after the trial of Garlinghouse and Larsen.
MetaLawMan Explains Why Ripple Will Oppose
Meanwhile, the pro-XRP legal expert speculated that Ripple would file an opposition to the SEC’s request. He highlighted three reasons why Ripple Labs would oppose the move.
Firstly, Ripple will not want to agree that there are “substantial grounds for difference of opinion” on the ruling.
Secondly, MetaLawMan asserted that there is a non-zero chance of Congress signing a new crypto regulation into law.
“That legislation could conceivably characterize the original Institutional Sales of XRP as Not securities transactions because the institutional buyers of those tokens did not receive equity or legal rights to participate in profits generated by Ripple in exchange for their money,” he added.
The third reason why Ripple will oppose the request is because of the chance of a new administration coming into power by January 2025. MetaLawMan speculated that the new administration could take a different approach to SEC’s enforcement actions championed by new leadership at the agency.
If this happens, MetaLawMan said the new administration could dismiss the Ripple case or settle with the company.
“For these reasons, I believe Ripple is more likely to choose the slower route and, therefore, oppose the interlocutory appeal,” said MetaLawMan.
Judge Torres May Take an Unusual Step
Furthermore, MetaLawMan noted that while certifying an interlocutory appeal has very little chance of success, the recent remark by Judge Jed Rakoff about the Ripple ruling could prompt Judge Torres to take an unusual step.
Recall that Judge Rakoff recently declined to follow Judge Torres’ reasoning in the Ripple case after TerraForm Labs and its founder, Do Kwon, attempted to use the ruling to dismiss the SEC lawsuit against them.
As reported, Judge Rakoff denied Terra’s motion to dismiss while firing shots at Judge Torres’ decision. The judge noted that the Howey test does not distinguish between buyers.
His comment stirred speculations that the Second Circuit would overturn Judge Torres’ decision on Ripple’s programmatic sales of XRP.