The SEC is at it again. The regulatory status of XRP, the crypto released by Ripple, has been the subject of legal discussions in the crypto community and beyond. The case between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has drawn the crypto community’s attention in a recent development, the SEC suggested that the decision in favor of Ripple Labs might be appealed.
This action was taken in response to concerns highlighted by a federal judge’s ruling on potential flaws in the verdict. The continuing court dispute could establish a precedent for future regulatory actions, which has huge ramifications for cryptos.
SEC teases XRP lawsuit appeal
The crypto community can breathe a sigh of relief after a judge ruled that Ripple did not break any laws by selling XRP to investors. As a result, the slew of other defendants facing SEC litigation for allegedly selling securities now have reason for optimism.
Do Kwon, co-founder of Terraform Labs, is one of these defendants. The WSJ reports that Kwon, who has been accused of fraud by the agency, is attempting to leverage the Ripple outcome in his legal battle.
The SEC has stated that the judge hearing his case should not look to the Ripple decision for guidance. It said the ruling by Judge Torres “adds baseless requirements” to the test used to determine if an asset is a security and that it will be “further reviewed.”
According to the entity, the Howey test, used to establish whether a given transaction constitutes an investment contract, is one such “fundamental securities laws principle” violated by the decision.
The regulatory arm’s remarks follow its Chair Gary Gensler’s dissatisfaction with the court’s decision that XRP is not a security when sold to ordinary investors.
On the same day, Gensler spoke about artificial intelligence at the National Press Club and was asked if the recent court decisions indicated a pressing need for unambiguous industry regulation.
Gensler didn’t offer a clear response to this, though.
Recently, the regulatory entity commented on the Ripple Labs case in a lawsuit against Terraform Labs and its founder, Do Kwon, for “orchestrating a multi-billion dollar crypto asset securities fraud.”
In its response to Terraform Labs’ petition to dismiss filed on July 21, in which the defendants referred to the possibly precedent-setting Ripple Labs ruling, the entity raised several concerns with the court’s recent decision on XRP.
Implications of a potential appeal
The stakes for the crypto business are high if the Commission decides to pursue an appeal. For starters, it would extend the regulatory ambiguity period surrounding XRP, which could slow down its market adoption and growth. Market participants might start to wonder about the legal standing of other tokens, which could cause investors and merchants to proceed cautiously.
In addition, the appeal process can significantly aggravate tensions between the crypto business and government agencies. This case has already shown how difficult it is to regulate cryptos because of their specific features and decentralized nature. Protracted litigation can widen the gap between the Commission and the crypto community, making it harder to create regulations that encourage innovation and safeguard investors.
However, the SEC’s position that XRP is a security would be strengthened if the appeal is successful and the court ultimately favors the Commission There may be repercussions for other projects developing crypto projects with similar features due to this decision. It can alter the regulatory climate of the crypto industry by setting a standard for how authorities evaluate and manage digital assets in the future.
