Legal Expert Says SEC Appeal in Ripple Case Was a “Strategic Blunder”

Attorney Beuke believes the SEC made a strategic blunder by filing a motion to certify an interlocutory appeal in the Ripple case.

The SEC’s recently-filed motion to certify an interlocutory appeal in the Ripple lawsuit has stirred up debate among lawyers.

Recall that the SEC recently filed a motion requesting that Judge Analisa Torres certifies an interlocutory appeal. The SEC wants a review of the judge’s decision on Ripple’s programmatic sale of XRP and other distributions, which were declared non-securities.

As expected, several legal experts have been reacting to the SEC’s motion to certify an interlocutory appeal. While some lawyers think the SEC is right to seek an interlocutory appeal, others believe the move is a mistake.

SEC Misunderstands Court’s Ruling

In a recent tweet, prominent immigration lawyer Greg Beuke asserted that the SEC made a mistake by filing for an interlocutory appeal.

According to Beuke, the securities regulator “fundamentally misunderstands” Judge Torres’ ruling. He noted that the judge never ruled that programmatic sales of XRP on digital exchanges cannot be investment contracts.

“She only ruled the SEC failed to meet its burden of proof that a reasonable retail investor would believe they were relying on Ripple’s efforts for profits,” Attorney Beuke said.

She only ruled the SEC failed to meet its burden of proof that a reasonable retail investor would believe they were relying on Ripple's efforts for profits. The SEC relied on cherry picked statements from Ripple & select employees, but failed to produce evidence of the reach. /2

— Greg Beuke 388 Followers Beware of Imposters (@GregBeukeAttyKS) August 19, 2023

Beuke added that the SEC only built its theory around “cherry-picked” statements from Ripple and selected employees but failed to provide any evidence to support its claim.

Per Beuke, the SEC did not provide evidence of any XRP holders who relied on Ripple’s efforts to make gains. Furthermore, the regulatory agency did not attempt to refute the affidavits gathered by Attorney John Deaton from XRP holders.

It bears mentioning that the affidavits played an essential role in Judge Torres’ ruling regarding Ripple’s programmatic sales on exchanges.

SEC Interlocutory Appeal Was a Mistake

Beuke further described the SEC’s move for an interlocutory appeal as a “huge strategic mistake.”

He explained that it would have been more beneficial to the SEC if it appealed the case’s final ruling instead of requesting an interlocutory appeal (a type of appeal filed when there are still pending issues in the case).

Per Beuke, appealing the final ruling will enable the party to interpret the order in a way that will help its case. Another benefit of appealing a final ruling is that the court that gave the verdict will not have the opportunity to explain its motive behind the decision.

However, the SEC has lost this privilege by filing for an interlocutory appeal. According to the legal expert, the SEC has given Judge Torres a chance to clarify that her ruling was due to the agency’s failure to meet its burden of proof.

SEC Is Stuck With Nothing on Appeal

Furthermore, Beuke pointed out that no party, including the SEC, can add new evidence or argument during an appeal.

“The SEC is stuck with the record and will have scant evidence to point to on appeal about reasonable retail purchasers,” he added.

Beuke argued that even though the Second Circuit agrees with the SEC’s theory, it will still point to Judge Torres’ ruling being based on an “undisputed factual record.”

Notably, the SEC must show that retail XRP purchasers were aware of Ripple and relied on the company’s direct efforts to make profits. However, the SEC is stuck with nothing on appeal, he added.