FOX Journalist Says SEC Will Likely Appeal Ripple Ruling, US Senate Candidate Reacts

Former SEC lawyer says the regulator will likely appeal Judge Analisa Torres’ July 2023 ruling on Ripple’s programmatic sales of XRP.  

FOX Business journalist Eleanor Terrett made this known yesterday, noting that she was reliably informed by a former SEC lawyer who recently left the commission. 

SEC Thinks Judge Torres Erred 

Judge Torres issued the programmatic sales ruling in July 2023, declaring that the transactions were not investment contracts. Although the SEC had attempted to file an immediate appeal to overturn the decision, the judge ordered that they wait until all issues of the lawsuit are resolved. 

With the case concluded in the district court and the October 7 appeal deadline approaching, a former official of the SEC suggested that the regulator could likely appeal the programmatic sales ruling. 

According to Terrett, the SEC believes the judge was wrong, and the decision does not align with legal standards. Hence, the commission favors an appeal to overturn the decision in the U.S. Court of Appeals for the Second Circuit.

🚨NEW: A former @SECGov lawyer who recently left the agency tells me the SEC will ‘probably’ appeal Judge Torres’s July 2023 ruling concerning the $XRP programmatic sales in the @Ripple case partly because: “everyone over there [at the SEC] truly believes that the decision is…

— Eleanor Terrett (@EleanorTerrett) September 26, 2024

US Senate Candidate Says It Makes No Sense to Appeal 

As expected, several legal experts, including Massachusetts Senate Candidate John Deaton, have reacted to the development. 

Attorney Deaton, whose contributions were significant regarding Ripple’s victory on programmatic sales, expressed confidence that the Second Circuit will not overturn the decision. 

According to Deaton, all three factors of the Howey Test, a longstanding security test, must be met for a transaction to constitute an investment contract. However, in the Ripple case, the judge only relied on the test’s third prong to issue her ruling on programmatic sales. For context, the third prong of Howey requires the “expectation of profits based on the efforts of others.” 

Attorney Deaton emphasized that the Second Circuit would not find that Judge Torres erred in applying the third prong to the fact of the case because she cited the 3,800 XRP Holders’ Affidavits, which supports Ripple’s arguments that XRP holders did not expect to make profits based on its efforts. 

Interestingly, Deaton asserted that even though the Second Circuit finds that Judge Torres erred in applying the third prong, the SEC will still lose on the second prong—common enterprise. He argued that the common enterprise factor was the weakest part of the SEC argument; hence, it won’t be satisfied. 

“If that happened, the SEC would lose AGAIN and then have to appeal all over. It makes no sense to appeal this ruling!” Deaton remarked. 

Lawyer Distinguishes Secondary Market Sales From Ripple’s Programmatic Sales 

Meanwhile, famous legal expert Fred Rispoli cleared misconceptions regarding a potential appeal in the Ripple case. He made the clarification after top crypto YouTuber Wendy O speculated that an appeal challenging XRP security status in the secondary market could spell doom for the entire crypto industry. 

Reacting, Attorney Rispoli noted that the SEC lost on programmatic sales, not secondary market sales. He asserted that Judge Torres completely excluded secondary sales in her landmark decision; hence, it cannot be appealed. 

According to Rispoli, programmatic sales centers around Ripple’s XRP sales on exchanges using trading algorithms. Conversely, secondary sales involve crypto-related transactions initiated on exchanges by members of the public. 

In the meantime, the October 7 appeal deadline is fast approaching. If the SEC plans to appeal the programmatic sales ruling or any aspect of the case, it must file an appeal notice before the deadline elapses.