Prominent lawyer James Murphy (MetaLawMan) says the U.S. SEC will appeal the Ripple verdict.
During an interview on The Wolf of All Streets podcast, Attorney Murphy suggested two reasons why the SEC may be prompted to appeal the Ripple decision.
Disgorgement Concerns
According to the lawyer, the first issue revolves around the disgorgement decision. Recall that Judge Analisa Torres did not grant the SEC’s request for disgorgement, worth $876.3 million. Notably, Judge Torres ruled that the SEC did not show that institutional buyers of XRP suffered pecuniary harm.
Reacting, Attorney Murphy stated that this decision impacts other SEC pending cases as it requires the commission to show that investors suffered economic losses before it could seek disgorgement following a securities law violation. He asserted that the Second Circuit introduced this requirement last year via the SEC v. Govil lawsuit.
However, Attorney Murphy pointed out that there is a split regarding this order in the circuit. Specifically, the Fifth Circuit emphasized that the SEC does not need to show that buyers suffered losses before seeking disgorgement. As a result of this split, Attorney Murphy said the SEC might appeal the disgorgement decision.
Programmatic Sales Ruling
Attorney Murphy’s second reason for believing the SEC could appeal revolves around Judge Torres’ summary judgment on programmatic sales.
On July 13, 2023, Judge Torres confirmed that programmatic sales of XRP via the secondary market do not constitute investment contracts. According to Murphy, the commission might appeal since this decision will likely impact other crypto-related lawsuits.
Recall that the ruling judge of the SEC v. Binance lawsuit leveraged the Ripple decision to declare that secondary market sales of BNB are not security transactions. The SEC might want to prevent a similar occurrence in other crypto cases by appealing Judge Torres’ programmatic sales decision.
It bears mentioning that the SEC initially sought an interlocutory appeal to overturn this decision last year. However, Judge Torres denied the request and ordered the commission to wait, pending the resolution of the remedies phase.
Ripple Could Also Appeal
In a separate development, Matt Rosendin of CapSign forecasts that Ripple will also appeal Judge Torres’ decision.
According to him, the judge’s order of a permanent injunction on the company’s future XRP sales poses a major challenge to institutions seeking to purchase XRP directly from Ripple. As reported earlier, the judge imposed a permanent injunction on Ripple’s future sales of any securities unless the company obtains approval from the SEC.
Rosendin said this requirement might compel U.S. institutions to buy XRP from the secondary market instead of directly from Ripple. He added that the injunction could mitigate the adoption of Ripple’s ODL, thus affecting XRP liquidity in the U.S. market.
Meanwhile, two Ripple executives—Brad Garlinghouse (CEO) and Stuart Alderoty (CLO)—commented on the recent decision. They applauded the court’s reduction of the SEC’s excessive $2 billion demand to $125 million.
However, they did not comment on the injunction part of the ruling. Some believe this suggests that the executives are not entirely pleased with the court’s permanent injunction order.
In the meantime, the crypto community would know whether any of the parties will appeal in the coming days. Notably, the parties are expected to officially appeal within 60 days after the final verdict was entered on August 7.
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