US Court Says Ripple Case is Unlike Terraform and LBRY Lawsuits

In a recent development in the ongoing legal battle between the US Securities and Exchange Commission (SEC) and Ripple Labs, the court has denied the SEC’s motion to certify for interlocutory appeal.

This time, one of the court’s pivotal judgments is that the disputed Ripple sales of XRP stand in contrast to the Terraform case — unlike what the US regulator claimed in the motion for appeal. 

A notable XRP influencer, Ashley PROSPER, shared a screenshot of the court ruling with the crypto community.

#XRP #XRPCommunity
Judge Torres shreds the SEC argument that there is substantial ground for a difference of opinion.
No, it's not like the Terraform case, and No it's not like the LBRY case. The Ripple case and XRP are legally unique.? pic.twitter.com/ferT5G8IDJ

— Ashley PROSPER (@AshleyPROSPER1) October 3, 2023

Ripple Case Is Unlike Terraform’s

Notably, the presiding Judge, Analisa Torres, hinged her decision on the beliefs of the retail investors. She argued that in the Terraform case, it was plausible for a retail investor to believe Terraform’s effort would generate additional profits for all holders.

However, the court found this scenario not applicable to Ripple’s sale of XRP. In particular, Judge Torres emphasized that the reasonable retailer would not expect that sales of XRP would be fed back into Ripple and the XRP Ledger to generate additional profits for all XRP holders.

Furthermore, the court pointed out that Ripple’s key promotional materials were primarily for institutional investors. Explicitly, it mentioned that while the “Ripple Primer” and “Gateways” brochures unequivocally stated that Ripple hopes to profit from XRP, the materials were not disseminated to retail investors.

This distinction led the court to conclude that programmatic buyers did not have the same reason as institutional buyers to believe that Ripple would use their capital contributions to generate profits on their behalf, unlike the situation in the Terraform case.

Ripple Case Also Not Like LBRY 

Regarding the argument on Other Distributions by Ripple, the court dismissed the SEC’s claim that there was a substantial difference of opinion.

Judge Torres mentioned that the US regulator had cited the SEC v. LBRY lawsuit to support its position against Ripple. However, the court noted that the case did not dispute the critical component of the Howey test that was in question in the Ripple case.

The statement read:

“The Court cannot draw any conclusions about the LBRY court’s reasoning as to an issue that was never litigated. Therefore, the SEC fails to point to any digital-asset cases which conflict with the Court’s holding as to the Other Distributions.”

Deaton Reacts

The prominent lawyer supporting XRP, John Deaton, expressed his satisfaction with the court order. In his comments, he described the order as “UNTOUCHABLE.”

Deaton expresses, “… She clarified that she never asserted that no digital asset could be considered a security when sold on an exchange. Instead, her determination is that, in this instance, XRP does not fall into that category. Even acknowledging that some XRP purchasers engaged in speculative activities, the SEC failed to establish a connection to Ripple’s efforts…”

And let me add, my very quick perusal of her order is UNTOUCHABLE. And yes, evidence submitted by XRP holders make another appearance in this decision – in her findings of fact – that she relied on. As I’ve maintained all along, her decision is based on the facts of THIS case.…

— John E Deaton (@JohnEDeaton1) October 3, 2023

Notably, Deaton highlighted that the evidence submitted by XRP holders played a role in the court’s findings of fact.